Risk in positive ahead of US GDP, Fed Chair Yellen
Equities were mixed and the US Dollar Index was sent lower for a second day in a row on Thursday on back of mixed signals from the US economy. Oil tested the $50/barrel, but got rejected and is currently back below $49. Fixed income yields fell across the board with emphasis on the US. Gold posted its seventh day of losses, but has found support around the 1210 level this morning. Overnight, most Asian indices were higher despite a higher than expected Japanese CPI. The JPY being the strongest currency in the Asian session – especially against the CAD, which is suffering from the weaker oil price, CADJPY down 0.5% overnight.
Thursday, better than expected US Core Durable Goods Orders for April triggered positive risk sentiment and was followed up by better than expected Pending Home Sales for April, which on a monthly basis rose 5.1% vs. 0.6% expected. The prior figure was revised higher to 1.6% from 1.4% adding to the good mood. EURUSD is currently flirting with the 100-Day SMA and is curbed so far by the 38.2% Fibo in recent wave.
From the UK, the GDP for Q1 came out more or less as expected, with a bias to the downside, but GBP pairs were not that affected. The FTSE has sustained above the 50-day SMA for a second day in a row, but the momentum has started to fade.
We expect a slow start to the Friday session due to the lack of macro news. We have seen some policy makers hitting the headlines on concerns over a potential BREXIT, which has triggered offers in the GBP, but this is most likely a scenario that traders should get used to ahead of the referendum on June 23. In the afternoon, the US will take focus as we have the US GDP, Michigan Confidence and at 1915CET, all eyes will be on the Fed Chair Yellen in a discussion with Gregory Mankiw. Although the subject is not on the current monetary policy, the markets will be monitoring closely in order to spot any potential hints ahead of her next speech scheduled June 6.
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