Friday 8th May: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei up 0.60 %, Shanghai Composite gained 1.25 %, Hang Seng 0.70 % higher, ASX rose 0.30 %
  • Commodities: Gold at $1183 (+0.10 %), Silver at $16.30 (+0.10 %), WTI Oil at $58.70 (-0.40 %), Brent Oil at $65.35 (-0.15 %)
  • Rates: US 10 year yield at 2.16, UK 10 year yield at 1.924, German 10 year yield at 0.58

News & Data:

  • China Trade Balance CNY34.13bln, Expected: CNY39.45bln, Previous: CNY3.08bln
  • China Exports -6.4 %, Expected: 2.4 %, Previous: -15.0 %
  • China Imports -16.2 %, Expected: -12.0 %, Previous: -12.7 %
  • Asian shares rebound, sterling jumps on UK exit polls – RTRS
  • U.S. job growth seen regaining steam, keeping Fed rate hike on track – RTRS
  • Some BOJ members warn of soft consumption in April: minutes – RTRS
  • Sterling shines on expectations UK’s Cameron will stay in office – RTRS
  • RBA Statement on Monetary Policy: To Continue To Assess Outlook And Adjust Policy As Needed
  • RBA: Cuts 2015-16 Growth Est. To 2-3% Vs 2.5-3.5% Seen In Feb
  • RBA: Cuts June 2016 Core Inflation Est. To 1.75%-2.75% Vs 2%-3%
  • RBA: Growth To Remain Below Trend For Longer Than Was Expected
  • RBA: Jobless Rate To Peak At 6.5% In Mid-2016, Stay Elevated
  • RBA: Reiterates Further A$ Depreciation Seems Likely, Necessary

Markets Update:

While most major pairs remained in tight ranges ahead of the NFP release this afternoon, there has been high volatility in the GBP pairs. The currency outperformed after exit polls showed that the Conservatives led by David Cameron are set to govern the UK for another five years. GBP/USD has been very well bid in Asia and the pair broke above the 1.55 level earlier. London is likely to have demand for the Pound as well, so it is certainly possible that we’ll see 1.56 ahead of the NFP.

Looking ahead, we have some tier 2 data out of Europe in the morning, with Germany and UK both publishing their trade balance numbers. The main event of the day is of course the NFP release in the afternoon, which could set the direction for the USD in the near-term. A disappointing number would lead to another round of USD position covering, as funds still remain heavily long the Dollar, and likely push the EUR/USD to 1.15. On the other side, a strong number could help the USD regain some strength against the other major currencies and in this scenario, it would likely be most favourable to buy USD against the commodity currencies. Keep an eye on the revision for last month’s NFP print too, as many are expecting a larger revision and this could impact the market.

Upcoming Events:

  • 06:45 BST – Swiss Unemployment Rate
  • 07:00 BST – German Trade Balance
  • 07:00 BST – German Industrial Production
  • 08:15 BST – Swiss CPI
  • 09:00 BST – Italian Industrial Production
  • 09:30 BST – UK Trade Balance
  • 13:30 BST – US NFP
  • 13:30 BST – US Unemployment Rate
  • 13:30 BST – US Average Hourly Earnings
  • 13:30 BST – Canadian Unemployment Rate
  • 13:30 BST – Canadian Employment Change

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