- European equities open higher to start the dayby Justin Low on May 25, 2022 at 7:02 am
Eurostoxx +0.8%Germany DAX +0.8%UK FTSE +0.5%France CAC 40 +0.6%Spain IBEX +0.9%This mirrors the more optimistic mood in US futures, as risk sentiment is tilted slightly more positive on the day. S&P 500 futures are up 0.6%, Nasdaq futures up 0.8%, and Dow futures up 0.3% currently.
- Euro gains stall, dollar steady to start the sessionby Justin Low on May 25, 2022 at 6:49 am
It's a bit of an assuming start to European morning trade for major currencies, despite the slightly more positive risk mood. The euro is down slightly just back under 1.0700, seeing its gains over the past two days stall for a bit. I outlined some thoughts about the single currency yesterday here and why any extended bounce may not hold given the market outlook. One of the more intriguing dollar pairs now in my view is USD/JPY after the drop below 127.00 yesterday to its lowest since 18 April: The pair is seeing a light bounce back near the figure level but from a technical perspective, sellers are certainly looking poised to try and push the agenda. If they can hold a firm break below 127.00, the 125.00 level is the next key target. The fact that Treasury yields are also tailing off from its recent highs is also helping to keep the downside momentum for now. 10-year yields are down to near 2.75% now from a high of 3.20% just two weeks ago. Looking elsewhere today, the kiwi is the lead gainer after the RBNZ hiked rates by 50 bps as expected. But the central bank outlined a more hawkish rate projection, underlining its conviction to hike rates beyond neutral in order to rein in inflation. That has taken NZD/USD to test 0.6500 on the day: The 38.2 retracement level @ 0.6529 and the 4 to 5 May highs around 0.6550-68 will be key resistance points to watch next.Besides that, the dollar is keeping rather steady overall with little change observed among other major currencies.
- France May consumer confidence 86 vs 89 expectedby Justin Low on May 25, 2022 at 6:45 am
Prior 88 French consumer confidence continues to decline in May, but less sharply than in March and April at least. That said, the reading remains well below the long-term average of 100 and exemplifies the deterioration in sentiment amid higher inflation and worries about a recession. Further details in the report:
- Risk sentiment slightly buoyed going into European morning tradeby Justin Low on May 25, 2022 at 6:14 am
A look at some of the changes in stock futures:S&P 500 futures +0.4%Nasdaq futures +0.6%Dow futures +0.2%German DAX futures +0.8%Eurostoxx futures +0.7%UK FTSE futures +0.7%The gains have moderated a little from earlier in the day but it still beats out the more cautious and subdued tone from yesterday at least. Overall, it hints at more of a push and pull feel on the week as the selling pressure since April meets a bit of a pause.As mentioned yesterday:"As much as there was some optimism late last week (into the closing stages at least) and early this week, it is best to be reminded about the challenging backdrop that has contributed to the drag in risk trades since April."Yes, we may be overdue a correction. I mean seven straight weeks of declines for US stocks is definitely up there in terms of the selling being rather stretched. But we certainly are getting a reminder today of all the major themes at play in markets."Inflation pressures are still running rampant as evident by European PMI readings today. Recession risks are continuing to grow by the day and that is evident by the extremely poor UK PMI readings today. And central banks are continuing to look towards tightening policy as evident by Lagarde's commitment in her remarks earlier today as well."So, while there is scope for some breathing room, let's not forget that the key themes that got us here are still very much at play.
- Germany June GfK consumer confidence -26.0 vs -25.5 expectedby Justin Low on May 25, 2022 at 5:59 am
Prior -26.5; revised to -26.6The slide in German consumer confidence comes to a halt but that comes after the record low posted in May. As such, sentiment is still rather poor as inflation and geopolitical tensions continue to weigh. GfK notes that:"Although this means that the consumer climate has improved slightly, consumer sentiment is still at an all-time low. Despite further easing of pandemic-related restrictions, the war in Ukraine and especially high inflation are weighing heavily on consumer sentiment."
- Germany Q1 final GDP +0.2% vs +0.2% q/q prelimby Justin Low on May 25, 2022 at 5:58 am
GDP (non-seasonally adjusted) +3.8% vs +3.7% y/y prelim GDP (working day adjusted) +4.0% vs +4.0% y/y prelim This just reaffirms that the German economy did grew slightly in Q1, with the Russia-Ukraine conflict having an increasing impact starting from the end of February.
- Japan March leading indicator index 100.8 vs 100.9 priorby Justin Low on May 25, 2022 at 5:01 am
Prior 100.9; revised to 100.1 Coincident index 97.5 Prior 95.5; revised to 96.8 The overall assessment of the coincident index remains unchanged i.e. seen as 'improving'. The index is used as a reference to economic conditions, but most of the indicators used to make up the index has already been released individually - so there isn't much of an impact on this release. The index basically measures up employment data, consumer confidence, production, housing, and stock market data, etc as its leading indicators to derive the number.
- Heads up: ECB president Lagarde, BOJ governor Kuroda set to speak later todayby Justin Low on May 25, 2022 at 4:51 am
ECB president Lagarde is scheduled to speak at 0800 GMT (for about an hour) as part of a session in the World Economic Forum in Davos. She will be participating in a discussion on "European Unity in a Disordered World?", touching on the EU's efforts in adopting a more assertive role as a global economic and geopolitical actor.Meanwhile, BOJ governor Kuroda will be delivering opening remarks at 1100 GMT (for about 20 minutes) at the BOJ-IMES Conference. The theme this year is "New Dimensions and Frontiers in Central Banking".Given the backdrop of both events, there might not be much policy remarks - at least not significant ones - from either central bank heads today.
- A couple of light releases to move things along in Europeby Justin Low on May 25, 2022 at 4:19 am
The push and pull in markets continue, with the risk mood swinging back the other way in trading today. Tech stocks were hampered despite a modest recovery in value stocks yesterday in Wall Street, though US futures are all pointing higher on the day so far. Here's a glance at things:S&P 500 futures +0.7%Nasdaq futures +0.9%Dow futures +0.4%The positive mood is also teeing up Europe for a bright start, with the yen and franc slightly lagging in the major currencies space.The kiwi is the notable mover with NZD/USD pushing above 0.6500 after the RBNZ delivered on a 50 bps rate hike here. The higher cash rate projections are helping to spur on the kiwi on the day. For some context, this is the fifth rate hike in succession for the RBNZ (raising the OCR from 0.25% to 2.00% now) and they are still unyielding in trying to pin down inflation.But as central banks continue down this path, just keep in mind the illusion that they're trying to sell.Anyway, risk sentiment will continue to dictate proceedings on the day with a focus on the FOMC meeting minutes release later. There won't be much in Europe to really distract from that once again. Just be reminded though, that it will be a holiday in some parts of Europe tomorrow (notably Germany, France, Switzerland).0600 GMT - Germany Q1 final GDP figures0600 GMT - Germany June GfK consumer confidence0645 GMT - France May consumer confidence0800 GMT - Switzerland May Credit Suisse investor sentiment1100 GMT - US MBA mortgage applications w.e. 20 MayThat's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.
- ForexLive Asia FX news wrap: NZD surged on RBNZ hawkish outlookby Eamonn Sheridan on May 25, 2022 at 2:57 am
RBNZ Press Conference with Governor Orr coming up at 0300 GMT - live link NZ cash rate 2%, going to nearly 4%. AUD cash rate 0.35%. Say goodbye to AUD/NZD NZD/USD surges after the RBNZ raises rates and outlook for rates higher Reserve Bank of New Zealand cash rate hike of 50bps, as expected Have the US and South Korea fired missiles at North Korean missile launches? Australian Q1 2022 Construction work done -0.9% q/q (vs. expected +1.0%) PBOC sets USD/ CNY mid-point today at 6.6550 (vs. estimate at 6.6543) ICYMI - PBOC has met with major finance groups to urge more support for the economy ICYMI - US Seizes Iranian crude shipment from Russian Tanker in Greece Chinese diplomat on joint air force operations with Russia China coronavirus - Tianjin has lockdown its city centre More from RBA's Ellis - further rate hikes are on the way Singapore Q1 economic growth 0.7% q/q (expected 0.8%) and 3.7% y/y (expected 3.7%) Japanese government economy report - raises its assessment on employment RBA's Ellis says Australian construction delays widespread, bulding supplies short ICYMI - Fed's Bostic flagged a potential rate hike pause in September (post-Jackson Hole) ICYMI - Guggenheim's Minerd says a Fed funds rate above 1.75% is 'too restrictive' MUFG on EUR/USD, have a neutral bias & see a range of 1.03/1.11 North Korea has fired a total of 3 ballistic missiles this morning (Asia time) ICYMI - India's Oil Minister said a crude oil price of $110 a barrel was not sustainable US President Biden will speak about the Texas elementary school shooting on Tuesday night Goldman Sachs likes short USD/JPY exposure Forexlive Americas FX news wrap: New home sales starts to show price and rate pressures North Korea fires ballistic missile towards the Sea of Japan Trade ideas thread - Wednesday 25 May 2022 Nasdaq snapped lower. Dow closes higher The Reserve Bank of New Zealand raised the cash rate by 50bps at its monetary policy meeting. This takes the cash rate from 1.5% to 2.0%. The rate hike was widely, basically unanimously, expected. Markets were pricing in the peak for the cash rate to somewhere circa 3.5% but the RBNZ surprised by ratcheting up the expected peak to 3.95% in H2 of 2023 (3.25% by the end of 2022). This was a hawkish surprise. NZD/USD jumped to circa 0.6500 from around 0.6430 heading into the announcement. We are now awaiting the press conference from Reserve Bank of New Zealand Governor Orr. In data today we had Australian ‘construction work done’ from Q1 of 2022. This feeds into the GDP data for the quarter. It disappointed at -0.9% q/q vs. the +1.0% consensus median estimate. While the Omicron wave and rain & flooding were expected to keep construction activity restrained, the actual result was a big disappointment. On the brighter side Q4 2021 (ancient history) was revised to +0.6% q/q from -0.4%. News from the region included North Korea firing off 3 ballistic missile tests. The US and South Korea responded by firing tests of their own, 2 missiles into the East Sea intended to show the readiness of their own "rapid strike capabilities". It was a mixed session for FX rates. EUR/USD and AUD/USD are net lower on the session. USD/CAD and GBP/USD are barely changed. USD/JPY is little changed also while USD/CHF is up just a little. NZD, as noted above, was the mover,
- Have the US and South Korea fired missiles at North Korean missile launches?by Eamonn Sheridan on May 25, 2022 at 1:37 am
This is the Google translation of a piece in South Korean media, Yonhap: Yeah, really hope something has been lost in translation, as they say. A US / South Korea retaliation along such lines is not something I can believe. ADDED - missile drills were conducted is the clarification. yeah, thats better!
- Australian Q1 2022 Construction work done -0.9% q/q (vs. expected +1.0%)by Eamonn Sheridan on May 25, 2022 at 1:29 am
These will be a negative input for the Q1 GDP numbers.Omicron wave disruptions during Q1 of this year weighed on construction. Wet weather and widespread flooding also. more to come
- ICYMI - US Seizes Iranian crude shipment from Russian Tanker in Greeceby Eamonn Sheridan on May 25, 2022 at 12:41 am
Dow Jones report: The U.S. Department of Justice has seized a shipment of Iranian crude in a Russian tanker in Greek waters and hired a vessel to bring it to the U.S. This happened in April. Posted overnight by DJ.
- Chinese diplomat on joint air force operations with Russiaby Eamonn Sheridan on May 25, 2022 at 12:37 am
Chinese diplomat getting double value for his tweet - not only supporting Ukraine invaders Russia, but also riling US security (Biden was in Japan at the time of this). Japan scrambled fighter aircraft in response to the joint China-Russia incursion yesterday. ---Geopolitical tensions are continuously ratcheting higher.
- China coronavirus - Tianjin has lockdown its city centreby Eamonn Sheridan on May 25, 2022 at 12:28 am
Tianjin is a northern coastal city close to capital Beijing. Out of Beijing, city officials have announced they are to tighten Covid controls amongst essential workers