Week to May 18th

Monday May 14

After finishing on a high on Friday, SPX pulled back today, as did FTSE, although NKY and DAX were fairly flat, as their denominated currencies moved down, and The Italian MIB stopped falling. Of more interest was the currency market, where, after being flat last week, the dollar resumed its upward climb, advancing against Gold and all currencies except GBP, which pushed briefly back above its 200-day moving average. US 10-year Treasury yields poked briefly above 3%, and closed pretty much on the line at 2.9951%. Oil was up on the day.

Tuesday May 15

There has been much talk of the 3% bond yield psychological roundpoint being a severe damper on equity prices, and so it was today, when the yield shot up by 8bp (the biggest one-day rise since Sep 11, 2017) and touched a six-year intraday high of of 3.095%. US Markets fell sharply, with SPX down 0.7% (not helped by the Retail Sales miss at 12:30) and Gold dropping below $1,300 to a 2018 low. Inevitably, this move helped USD. DXY added 0.69% to make a 2018 high, and all currencies were down, which in turn helped DAX and FTSE post small gains.

The rising US yields have of course had a knock-on effect on the equivalent German and UK bonds, up 3bp and 5bp respectively, so although EUR and GBP fell 0.6% and 0.3% respectively (note the lesser fall/higher yield rise in GBP, helped by the Claimant Count beat at 08:30), AUD and NZD fell further, down 0.7% and 0.74% respectively, the latter despite an upturn in the GDT Milk Index. Oil see-sawed throughout the day on Venezuela and Iran worries, and ended marginally up. TRY hit a record intraday low after President Erdogan spoke on Bloomberg TV.

Wednesday May 16

Equity markets were consistently up today, with the exception of the MIB which fell 2.3% on continued Lega/M5S ‘coalition from hell’ concerns. Italian 10-year yields had their largest single-day advance (16bp) since November 2016. Notably RUT, the US small-cap index closed at an all-time high.

Italy was responsible for EUR being the only currency to fall, hitting a new 2018 low, whereas all others rose sharply against USD (resulting in a near-flat DXY overall). EURJPY was down 0.3%. Gold was also flat on the day in line with DXY. Despite the pause in USD, and German and British yields pulling back, the US 10-year yield put on 1.6bp to hit another six year high. Oil was up sharply after the EIA print beat at 14:30 (with the previous evening’s API print missing), touching a new four-year high.

Thursday May 17

Today was the day the currency movements materially caught up with equities. It was another good day for USD, up across the board, and notably so against JPY and GBP.  SPX was flat on the day, but NKY, DAX and FTSE soared, the latter making an intraday (7799) and closing (7783) all-time high.

This was aided of course by the falling pound, and the surge in the price of Oil (Oil & Gas is 16.4% of FTSE, higher than any other except TSX (19.4%)). Even MIB recovered slightly. Oil itself was flat today, but not before touching an intraday of $72.28.

Gold was down in line with the stronger dollar, and yields were up another 2bp, both instruments making new 2018 records. 

This Bloomberg table shows the USD state of play for the week on Thursday evening.

Friday May 18

Equities pulled back slightly on Friday, with NKY moving more than the others as JPY (and Gold) being the only gainers against USD, as GBP came close to touching its 50-week moving average. Whether this provides support remains to be seen, but it is notable that the 200-week moving average was resistance both at Brexit and last month.

MIB fell sharply again (1.96%) as the Italian crisis rumbled on. Yields also took a breather, so technically it was a risk-off day with JPY, USD, Gold and Bond prices all up. Nevertheless, RUT posted another ATH. Oil was down in line with the generally stronger dollar, as DXY made another 2018 closing high of $93.66. CAD was down 0.59% after the Canadian CPI miss.

Please note all figures and percentages given for daily movement on indices cover the entire cash and futures period in that day.

WEEKLY PRICE MOVEMENT

USD resumed its upward path against all currencies, with DXY putting on 1.2%. The best currency to sell would have been EUR, although selling Gold would have been even better. Further EM weakness meant that shorting NIFTY would have been the best index trade.

After last week’s fall, cryptocurrencies were virtually flat this week, as volatility continues to reduce in the sector, as you can see in this chart.

AUDUSD 0.7507 (-0.46%)

EURGBP 0.8737 (-0.86%)

EURUSD 1.1768 (-1.42%)

GBPUSD 1.3457 (-0.60%)

NZDUSD 0.6919 (-0.62%)

USDCAD 1.2880 (+0.70%)

USDJPY 110.74 (+1.26%)

DAX     13071 (+0.65%)

FTSE     7773 (+0.84%)

NIFTY   10596 (-1.94%)

NKY     22834 (+0.59%)

SPX   2711.88 (-0.62%)

GOLD  1292.30 (-2.01%)

OIL     71.36 (+1.31%)

BTCUSD   8213 (-2.48%)

ETHUSD 689.63 (+1.63%)

(Crypto prices are given as at 0000GMT Saturday, two hours after the other markets close.)

NEXT WEEK (all times are GMT)

Monday May 21

The OPEC Clean Energy conference held in Copenhagen and Malmö starts today, and it is the second day of the G20 conference in Buenos Aires. A US Treasury report on Chinese trade [unfairness] is due. A Trump tweet is possible. SecState Pompeo speaks on Iran. A Mexican NAFTA team arrive in Washington. CB speakers today are Fed Bostic (centrist, voter) at 16:15, Harker (centrist, non-voter) and (Kashkari (dove, non-voter) at 21:30, and ECB Nowotny (hawk, voter) at 07:00. Today is the first day of the options month.

Tuesday May 22

In Europe, the deadline expires to elect the Catalonian President, and the UK begins the next round of Brexit negotiations. BoE Gov Carney appears before Parliament, for the Inflation Report hearings at 09:00. President Moon of South Korea visits Trump in Washington, expect a comment of some kind about North Korea. Otherwise a quiet day on data.

Wednesday May 23

Today is the biggest day of the week. At 08:30 we have UK CPI. This is the first, and most important of the three key UK releases this week which will influence the BoE’s next rate decision on June 21st. Then we have the all-important FOMC minutes later in the day. As ever, forward guidance is the key. SecState Pompeo appears before the House Foreign Affairs Committee. South Africa inflation is reported.

Thursday May 24

Two reports from the ECB today, the Financial Stability Review at 08:00, and the MPC minutes at 11:30. Also ECB Praet (dove, voter) speaks. BoE Gov Carney speaks twice, alongside Fed Dudley (centrist, voter) at 07:00 (Dudley speaks at 08:15) and again at 17:00. Fed Harker (centrist, non-voter) speaks at 18:00. South Africa makes a rate decision. Commentators have, unusually marked the Tokyo inflation figure as important this month. The second important GBP print, Retail Sales, is at 08:30.

Friday May 25

The final important UK print for the week is GDP, which should be taken in the context of the previous two releases. Today’s ECB speakers include Villeroy (centrist, voter) at 07:00, and Coeuré (hawkish, voter) at 13:15. Fed Chair Powell is in Sweden at the Riksbank (the world’s oldest CB) conference, where we may hear other important CB speakers. Bostic and Kaplan (hawkish, non-voter) also speak today. Note that US markets are closed Monday 28th for Memorial Day.

CALENDAR (all times are GMT). High volatility items are in bold

Sun May 20

22:45 NZD NZ Retail Sales (QoQ)

23:50 JPY Japan Trade Balance/Imports/Exports

Mon May 21

08:00 EUR EU Financial Stability Review

09:00 WTI OPEC meeting (all day)

12:30 USD Chicago Fed National Activity Index 

Tue May 22

08:30 GBP UK Public Sector Net Borrowing

20:30 WTI API Stock

Wed May 23

04:30 JPY Japan All Industry Activity Index (MoM)

06:00 EUR Germany GDP

07:30 EUR Germany Markit PMIs

08:00 AUD RBA's Governor Philip Lowe Speech

08:00 EUR Eurozone Markit PMIs

08:30 GBP UK CPI/RPI/PPI

13:45 USD US Markit Services/Composite PMIs

14:00 USD US New Home Sales (MoM)

14:30 WTI EIA Stock

18:00 USD FOMC Minutes

22:45 NZD Trade Balance/Imports/Exports

Thu May 24

00:00 EUR Eurogroup meeting (all day)

05:00 JPY Japan Leading Economic Index

06:00 EUR Germany Gfk Consumer Confidence Survey

08:15 USD Fed's William Dudley speech

08:30 GBP UK Retail Sales

11:30 EUR ECB MPC Minutes

12:30 USD US Jobless Claims

13:00 USD US Housing Price Index (MoM)

14:00 USD US Existing Home Sales (MoM)

18:00 USD FOMC Member Harker Speech

23:30 JPY Tokyo CPI

Fri May 25

00:00 EUR EcoFin Meeting

08:00 EUR Germany IFO - Business Climate/Current Assessment/Expectations

08:30 GBP UK GDP

12:30 USD US Durable Goods Orders

13:00 USD Fed Chair Powell Speech

15:45 USD FOMC Member Kaplan Speech

15:45 USD FOMC Member Bostic speech

17:00 WTI Baker Hughes US Oil Rig Count

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