Week to May 7th

Resolution of Fed policy only reverses trends for a few hours

MY CALL THIS WEEK : BUY GBPAUD

LAST WEEK

The long-awaited 50bp rate hike occurred as expected on Wednesday, and a comment by Chair Powell that the Fed were not considering a 75bp bhike in June (despite Fed Bulllard's hawkish comments) caused a spike with SPX up 3.4% and NDX up 4.7% in the remaining 90 minutes of the session . This move was fully retraced in the US Thursday morning session, as were gains made.

In another volatile week, the RBA made a hawkish hike, the BoE made a dovish hike, and the Fed were somewhere in-between. The latter made all the headlines and led to the strongest session since 2020. This was all given back just as quickly on Thursday and Friday and the SPX closed the week pretty much where it opened, creating doji patterns on the weekly chart and daily chart. This signals indecision, which is apt as there no consensus on what the Fed will do next. Despite Chair Powell saying the Fed were not “actively considering” 75bps hikes, the markets are assigning a 83% chance of a 75bps hike in June. They clearly believe the Fed has lost the battle with inflation and will have to play catch up. This view can be seen in the continued collapse in long bonds, with TLT down over –5% on the week, and USD making a new 2022 high on Friday.

Last week’s action was a challenge to trade and there were rumours of a fund blowing up during Thursday’s crash. It certainly tested our bullish view, but Friday’s close was off the lows and the weekly doji could lead to a reversal. Bulls now want to see the Fed take a “whatever it takes” stance on inflation in the hope they can ease off later so the terminal rate comes in less than expected. Again, we note that 10Y yields and DXY both have weekly and monthly exhaustion signals, but since these are long-term, the short-term charts could still overshoot.  


WEEKLY PRICE MOVEMENT

The biggest index mover was DAX for the third week, down 3%. The top forex mover was GBPAUD down 2.05%. Bitcoin and Ethereum continued to slide, and once again, some FANGs underperformed. Yet again AAPL was relatively unscathed.

Last week's GBPAUD short was the worst trade I could possibly have done, losing 2.05%, which means I am ahead 6.75% this year, with 9/16 (56%) wins. This week I am doing a reversal trade and buying GBPAUD again.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK

There is only one important release next week which is US inflation (CPI) on Wednesday. As we have stated before, the unemployment part of the Fed dual mandate is satisfied, so the primary indicator of the rate hike path in now inflation, given that the Ukraine effect has receded. In addition to the US, there are inflation reports from Germany and China on the same day. The week is also heavy with CB speakers, with three Fed speakers on Tuesday. Earnings next week is mainly China tech companies.


CALENDAR  (all times are GMT, volatile items in bold)

Monday May 9
02:00 China Imports/Exports/TB
13:00 BoE Saunders speech

Tuesday May 10
09:00 Germany ZEW Surveys
11:40 Fed Williams speech
17:00 Fed Waller speech
17:20 ECB De Guindos speech
19:00 Fed Mester speech

Wednesday May 11
01:30 China CPI (e1.9% p1.5%)
06:00 ECB Elderson speech
06:00 Germany CPI (e7.8% p7.8%)
08:00 ECB President Lagarde speech
09:30 DE10Y Bond Auction
12:20 ECB Schnabel speech
12:30 US CPI (Core e6.0% p6.5%)

Thursday May 12
06:00 UK Q1 GDP (QoQ e1.0% p1.3%)
12:30 US Jobless Claims
12:30 US PPI
15:35 BoC Gravelle speech

Friday May 13
02:00 RBA Bullock speech
07:00 ECB De Guindos speech
14:00 Michigan CSI (e63.6 p65.2)
16:00 ECB Schnabel speech

Week to May 3rd

Fed ‘no rate cut’, Strong NFP but weak AHE, AAPL up GOOGL down on earnings

Mon Apr 29

Markets were subdued today, although SPX made a new intraday high before closing at 2943. The best US Consumer Spending print (1230) since August 2009 was subdued by a miss on PCE, the inflation metric used by the Fed at the same time. DAX and FTSE were also slightly up but NKY futures (Japan was closed all week) were down. USD was flat (DXY -0.05%) with slight advances in most currencies being matched by a pullback in JPY and Gold. Oil and yields were slightly up. GOOGL missed on earnings after the bell and the stock dropped 5%.

Tuesday April 30

After a sharp pullback at the open, SPX rallied into the close to make a new all-time closing high of 2945.83. NDX was less fortunate as the GOOGL loss extended to 7.5% trimming 0.7% from the index. Similar patterns were seen on other markets, although FTSE only managed to end flat due to GBP strength. The AAPL beat at 2030 kept SPX futures rallying.

There was a definitely trend down in the dollar (DXY -0.20%), as EUR rose firmly on a string of strong data from Europe, German (0755) and Eurozone (0900) unemployment, European GDP (0900) and German inflation (1200) all beat estimates, whereas the US Home Price Indices (1300) and Chicago PMI (1345) missed. Other currencies (and Gold) advanced, especially GBP breaking back through $1.30 for the first time in three weeks. Only AUD was weighed by the China PMI miss (0100) and was flat on the day. Oil advanced slightly, and yields were flat after an earlier rally.

Wednesday May 01

The new month opened with PMI misses at 1345 and 1400, and markets began to fade. The Fed at 1900 did not mention rate cuts in the minutes and would not discuss them at the presser. Together with the PMIs, “Sell in May” sentiment, and of course all-time high resistance, SPX fell 0.8%, its worst day since March 22. Other world markets behaved similarly, although notably they had started falling earlier. The ADP jobs beat had little effect.

USD of course spiked up on the dismissal of cuts although it had already been falling all day. DXY ended up 0.1% up. GBP and JPY ended flat, but other currencies were slightly down. Yields were also flat, the Fed spike recovering earlier losses, as was Oil, after a wobble at the EIA miss at 1430.

Thursday May 02

We often remind you that the Fed effect continues into the next day, and so it was today, with DXY adding 0.22%, yields advancing again and SPX falling further. The German Manufacturing PMI at 0755 missed and slipped further to a new low of 44.4, although this was countered by the weaker EUR and DAX ended up on the day. FTSE and NKY rallied by were both dragged down by SPX in the US session.

All currencies and Gold moved down against the ’no rate cut’ dollar, although GBP’s move was more muted after a hawkish BoE. Oil gave up 3.4% in line with the two-day equity pullback.

Friday May 03

After two days of pullback, the blowout NFP at 1330 (263k vs 190k) changed the mood completely, and SPX added 1%, and risk-on NDX 1.6%. World equities joined in the party. The AHE print missed, and this is bad for USD (workers need wage inflation to afford higher interest rates), as did the ISM Services PMI at 1400. USD declined sharply, with DXY shedding 0.36%, and all currencies and Gold up, with a particularly strong showing from GBP, with cable adding 175 pips from 1100 onwards. Yields were down in line with the dollar, and Oil recovered some of Thursday’s collapse.

WEEKLY PRICE MOVEMENT

DAX was the winner this week, as US indices reacted to the Fed, and GBPJPY up 2.41% was the standout forex pair. Crypto rallied again, and the big FANG moves were on earnings, AAPL up and GOOGL down substantially.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on UUP. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold)

• Rate decisions in AUD and NZD
• Trade Talks resume
• US and China Trade Balances and inflation
• Earnings season largely over

Monday May 06

Markets are closed in the UK, Ireland and Japan, and there is no US news, and earnings season is largely over. Expect a quiet Monday, with the China PMI setting the tone.

01:45 CNY China Caixin Services PMI

08:00 EUR Eurozone Markit PMI Composite

09:00 EUR Eurozone Retail Sales (YoY)

13:30 USD Fed Harker speech

17:45 CAD BoC Governor Poloz speech

22:30 AUD Aus AiG Performance of Construction Index

Tuesday May 07

After earlier Australian releases, the RBA official consensus is a hold, but some commentators are predicting a 25bp cut. Uncertainty predicts a material move in AUD. Another day with no US (or European) news of note.

01:30 AUD Aus Retail Sales s.a. (MoM)

01:30 AUD Aus Imports/Exports/TB

04:30 AUD RBA Rate Decision/Statement (e 1.5% hold)

14:00 NZD NZ GDT Milk Index

14:00 CAD Canada Ivey PMIs

20:30 WTI API Oil Stock

23:01 GBP UK BRC Retail Sales

23:50 JPY BoJ MPC Minutes

Le jour de gloire est arrivé

Wednesday May 08

Amazingly, a third day without US major releases, so we turn to Asia. A 25bp cut in the NZD rate is priced in at 70%, so like Australia, uncertain enough to cause a move either way. Trade talks are back on the agenda, with Chinese vice-PM Liu visiting Washington. There are rate decisions on BRL (6.5% hold expected), and THB. South Africa holds a general election. Markets are closed in France for VE Day, oddly not celebrated in the UK. The only significant earnings release of the week is DIS, after the close. Guidance should include their new Disney Plus streaming service projections.

02:00 CNY Imports/Exports/TB

02:00 NZD RBNZ Rate Decision/Statement (e 1.50% p 1.75%)

03:00 NZD RBNZ Press Conference

06:00 EUR Germany Industrial Production

14:30 WTI EIA Oil Stock

20:05 DIS Earnings

Thursday May 09

The third major print from China this week is inflation, and may set the initial tone in the absence of European releases, although the US Trade Balance will be watched closely, being topical. There are rate decisions on NOK, CLP and PHP. Russian markets are closed for Victory Day.

01:30 CNY China CPI (YoY e 2.5% p 2.3%)

12:30 USD US PPI

12:30 USD US TB

12:30 USD US Jobless Claims

12:30 CAD Canada Imports/Export/TB

13:45 USD Fed Bostic speech

21:30 NZD NZ Business NZ PMI

22:45 NZD NZ Retail Sales

23:30 JPY Japan Overall Household Spending (YoY)

Friday May 10

Today is the most important news day this week, with the key US CPI release, estimated to improve despite last week’s PCE miss. Canada’s NFP comes a week later than the US this month. It would normally be a chance to see CAD reaction in isolation, but the US CPI print is simultaneous, so USDCAD could go either way. Plenty of Fed speakers today, with Bostic, Evans, Brainard and last but not least Chair Powell on the roster.

01:30 AUD Aus Home Loans

01:30 AUD RBA MPC Statement

06:00 EUR Germany TB

08:30 GBP UK 19Q1 Prelim GDP (QoQ e 0.2% p 0.2%)

08:30 GBP UK Manuf/Industrial Production

12:30 USD US CPI (Core YoY e 2.1% p 2.0%)

12:30 CAD Canada NFP/UnEmp/AHE/Participation (NFP est 1k p -7.2k)

13:05 USD Fed Bostic speech

17:00 WTI Baker Hughes Rig Count

18:00 USD US Monthly Budget Statement

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on Twitter, Facebook, Stocktwits, TradingView or Linkedin (all open in separate windows). Details of how I compile the report are here

Week to Apr 5th

Equities rally on China hopes, Flat dollar despite wild GBP, Best crypto week for over a year

Mon Apr 01

The first day of the week, the month and the quarter opened strongly after the China Manufacturing PMI beat at 0145. We pointed out the significance of this last week. The figure came in at 50.8 vs 49.9 est, only 0.9 beat, but critically crossing the 50 point, the line between contraction and expansion. The important US ISM similar release beat at 1400, giving a sharp uptick to USDJPY. (the same release for Germany at 0700 - 44.1 vs 44.7 est - showed that last month’s print of 47.6 was not an outlier, as some commentators had thought.

The net result was a strong risk-on run for equities across the board, and an advance of 0.13% for DXY. EUR, JPY, Gold and 10-year Bonds (inverse to yields) dropped suddenly after the ISM print. Against this, CAD perked up after hawkish (well less dovish than expected) remarks from the BoC at 1755. AUD, without news, was flat. The dollar advance would have been greater expect for cable, up 1% on ‘soft’ Brexit hopes.

Tuesday April 02

As we predicted last week, the RBA did indeed join the chorus of doves at 0330, and the day started with a sharp fall in AUD. GBP had collapsed overnight, but climbed back to end the day flat on reports of bipartisan (ie May and opposition leader Corbyn) Brexit talks. CAD faded the Poloz gains. As AUD is not part of DXY, and the other majors had a quiet day, the DXY basket closed virtually flat (-0.03%), as did yields. Gold was slightly up. Equities had another good day, but mostly outside the US. NDX managed to add 0.3% but SPX was flat.

What was interesting is that after months in the doldrums, BTC spiked up 20% up in an hour from 0430, with, obviously, over 100x normal volume (and held onto these gains). This was accompanied by a similar move in ETH, but that took two days to complete. Naturally rumours abounded an Asian ‘whale’ in this unregulated world.

Wednesday April 03

Reports in the FT that the US and China were close to finalising their trade deal, plus a raft of PMI Services beats, resulted in a third day of equity gains, particularly in DAX. Only the US wobbled slightly after their ISM Non-Manufacturing print missed at 1400, trimming an SPX 0.6% advance to 0.2% at the close. After two green days Oil was down slightly after the substantial EIA stock miss (+7.2M vs -0.4M, more is worse) at 1430.

DXY shed 0.22% today, on the contrasting US and other PMIs, and possibly the ADP jobs miss at 1215. Gold was down, and yields and AUD were up in line with risk-on equities. JPY and CAD were probably pulled in two directions, risk on vs dollar weakness and Oil respectively. Both currencies were flat. EUR and GBP were both up.

Thursday April 04

Another up day from equities as Trump confirmed the China progress, although the pace was slowing. FTSE gapped down 0.4% to reflect overnight GBP strength but managed to recover this to end flat. The dollar recovered to close where it ended on Tuesday, evenly across all currencies. Oil faded slightly in line with the dollar. Gold was unusual, spiking down 0.5% through six hours to touch it Mar 7 low before recovering. Yields were flat on the day.

Friday April 05

Without a lead from China, which was closed, markets breathed a sigh of relief on the NFP beat at 1230, showing that last month was an outlier, and all were up, although the DAX gain was marginal. The SPX ran nicely to a pattern we have pointed out before, where after an instant spike, the price fades until the cash open, and then the size of that spike is repeated, as shown in the chart here. The trade is to buy SPX at the open, with a stop below the pre-NFP price, and a target of the ramp repeated. Oil was up 1.5% in line with the mood.

DXY was only very slightly up (+0.07%), EUR made small gains to offset the fall in GBP (Brexit) and CAD (Canadian NFP miss). After a strong week, yields fell 4bp after Trump called for the Fed to reintroduce QE.

The US major markets are now very close to previous all-time highs. SPX and DJIA are 1.68% away, NDX is even nearer at 1.39%, although notably RUT, DAX, NKY are around 10% off. It will be interesting to see if the SPX record close of 2930 is beaten next week.

WEEKLY PRICE MOVEMENT

Another strong week for DAX makes it the top index mover again. In forex, the best trade would have been AUDJPY, up 0.90%. FANGs all beat their parent NDX index, with a particularly strong showing from FB, and the Tuesday crypto spike held, to give BTC and ETH their best week for over a year.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on UUP. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT, not BST)

(Calendar High volatility items are in bold)

• EU consider further Brexit delay
• US, China and German inflation
• ECB rate decision and statement
• Earning season starts on Friday

Monday April 08

After last weeks big calendar and start to the week and quarter, we are back to the usual quiet Monday today. Watch out for any weekend news, particularly on Brexit or Trump tweets. There are rate decisions on ILS and LKR. Markets are closed in Thailand.

06:00 EUR Germany Trade Balance

14:00 USD US Factory Orders (MoM)

Tuesday April 09

Another quiet day, with no releases in the European and US cash sessions, except the JOLTS jobs openings at 1400. Fed Vice Chair Clarida, (voter, obviously) centrist by definition, but thought to be leaning dovishly at the moment. Markets are closed in the Philippines and in Israel where there is an election, where the incumbent Likud government may not win. There is a rate decision on RSD.

01:30 AUD Aus Home Loans

05:45 CHF Switzerland Unemployment Rate

20:30 WTI API Oil Stock

22:45 USD Fed Clarida speech

23:01 GBP UK BRC Like-For-Like Retail Sales

23:50 JPY Japan Machinery Orders

Wednesday April 10

Easily the busiest day of the week, the EU summit is almost certain to grant UK PM May a long extension to Brexit, rather than the short one she has asked for, figuring that the longer the extension, the softer the eventual Brexit, which is the EU’s stated preference. With Bund yields still negative, the ECB statement should prove interesting. Further TLTRO details may be unveiled, and if not, may be asked about in the presser.

US CPI is expected to be unchanged, which validates the Fed’s current no hike policy. The risk is to the upside, ie a beat may make traders think again. Although not a rate set meeting, the FOMC March minutes today put some flesh on the bones of the dovish reversal seem recently.

00:30 AUD Aus Westpac Consumer Confidence

02:30 AUD RBA's Debelle speech

06:15 JPY BoJ Governor Kuroda speech

08:30 GBP UK Manufacturing/Industrial Production

08:30 GBP UK GDP (MoM Feb)

11:45 EUR ECB Rate Decision/Statement (est 0% hold)

12:30 USD US CPI (Core YoY est 2.1% prev 2.1%)

12:30 EUR ECB Presser

15:30 WTI EIA Oil Stock

15:50 USD Fed Quarles speech

18:00 USD FOMC Minutes

Thursday April 11

Voting in the Indian election starts today. The world’s largest electorate will take six weeks to vote, with the counting starting on May 23. Exit polls are notoriously unreliable, but nevertheless, any significant move from the BJP to the Congress party may have an effect on markets. Chinese and German inflation are the key prints on the day.

00:00 AUD Aus Consumer Inflation Expectations

01:30 CNY China CPI (est 2.3% prev 1.5%)

02:30 AUD RBA's Debelle speech

06:00 EUR Germany CPI (est 1.4% prev 1.5%)

12:30 USD US PPI

12:30 USD US Jobless Claims

13:30 USD Fed Clarida 2nd speech

20:00 USD Fed Bowman speech

22:30 NZD Business NZ PMI

22:45 NZD NZ Electronic Card Retail Sales 

Friday April 12

The Q1/2019 Earnings Season starts today with the usual first reporter JPM, and fellow bank WFC, before the bell. The dovish Fed is bad for banks, and traders will be watching forward estimates closely. The IMF begin a three-day meeting in Washington DC. Today is the next Brexit 'deadline' although it is likely another extension will have been granted before then. Markets have a half-day in Sri Lanka. There are elections in Finland on Sunday.

02:00 CNY China Imports/Exports/Trade Balance

02:15 CNY China FDI

09:00 EUR Eurozone Industrial Production

14:00 USD Michigan Consumer Sentiment Index (est 98.0 prev 98.4)

17:00 WTI Baker Hughes Rig Count

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on Twitter, Facebook, Stocktwits, TradingView or Linkedin (all open in separate windows). Details of how I compile the report are here

Week to Mar 29th

Further Brexit defeats, NZD collapse, Mueller exonerates Trump (for now)

Mon Mar 25

After last Friday’s collapse following the 10-year/3-month bond inversion, markets were subdued today, with SPX flat, although non-US markets showed some recovery. USD was similarly flat, with slight moves down in GBP being matched by slight increases elsewhere.  Oil, Gold and bonds (inverse to yields) were up on the day, with the 10-year yield down 4.4bp. Apple’s product event underwhelmed the market, and the stock dropped 1.5%.

Tuesday March 26

All equity indices were up today as market digested the Mueller report exonerating, which was announced at weekend, but probably took a day to digest. Sometimes they do this on a ‘no news’ day. The dollar was also up as the drop in yields halted. DXY added 0.28% but the picture was mixed. The usual risk-on profile was seen. Gold and JPY were down, but AUD and CAD were up. EUR fell after the Germany Gfk confidence miss at 0700, whereas GBP was slightly up as some Brexiteers softened on the Theresa May deal, not enough however for the vote, which was cancelled. Oil had another good day.

Wednesday March 27

The day started with the RBNZ joining the dovish CB chorus. The kiwi fell sharply, finishing nearly 2% down on the day. Also Trump potential Fed nominee Stephen Moore called for a policy reversal and rate cut. Yields naturally fell again, but surprisingly USD held its own with DXY adding 0.17%, in a mixed day where JPY advanced as rates fell, as did GBP, but others declined. Gold and Oil were down in line with the stronger dollar. The dovishness caused an early rally in SPX futures, but this sold off hard at the open despite the trade balance beat, and did not fully recovery. DAX and FTSE were choppy but ended roughly flat helped by weaker currencies. NKY fell all day. An odd day, where markets behaved counter-intuitively.

Thursday March 28

Markets recovered on Thursday as the US QoQ GDP and PCE beats at 1230 (although the YoY figure missed). Housing and Jobless Claims data was mixed. All indices were up on the day. DXY was up again, only 0.17% but all currencies were down, GBP sharply (over 1%) as British MPs voted down a series of alternatives to the Prime Minister’s deal. Gold was notably down 1.5%. Oil dipped during the session on growth expectations, but ended the day flat.

Friday March 29

A final rally on Friday, fuelled by China trade talks optimism, and another upturn in the Michigan Sentiment Index gave the indices their best quarterly increase since 2010, and the best SPX Q1 since 1998. A flat DXY belied substantial currency movement, in particular an immediate 0.68% move up in CAD after the GDP MoM beat at 1230 (0.3% vs 0.0% best), and a wildly choppy GBP after the third Brexit deal vote was lost, down 1.16% on the day. Yields carried on upwards, and Oil rallied in line with equities.

WEEKLY PRICE MOVEMENT

After last week’s work performance, DAX was the best index this week. Four weeks in a row now for GBPJPY as the biggest mover, like last week a sell. Cryptos had another quiet week.

We have problems with Google Finance data this week, so no table

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold)

• RBA Rate Decision
• More China trade talks
• Lots of Manufacturing data
• Non-farm Payrolls
• 
  

Monday April 01

This week Chinese Premier Liu travels to the US to continue trade talks. One of the busiest Mondays in months has a day packed with Manufacturing PMIs. China’s is very important, as it’s on the cusp on expansion/contraction, and may cause even more of an effect than the US ISM figure later in the day. Note that the UK and Europe are now on DST, but we stick with GMT in our listings. Also of course we start a new month and quarter.

01:00 CNY China Mfr & Non-Mfr PMIs (Sunday)

23:50 JPY Japan Tankan Large Mfr Index/Outlook (Sunday)

00:00 AUD HIA New Home Sales (MoM)

01:45 CNY Caixin Manufacturing PMI Mar (est 49.9 prev 49.9)

07:55 EUR Germany Markit Manufacturing PMI

08:30 GBP UK Markit Manufacturing PMI

09:00 EUR Eurozone CPI (Core est 1%)

12:30 USD US Retail Sales (Feb Control Group best 0.4% prev 1.1%)

13:30 CAD Canada Markit Manufacturing PMI

13:45 USD US Markit Manufacturing PMI

14:00 USD US ISM Manufacturing PMI (est 54.4 prev 54.2)

21:00 NZD NZIER Business Confidence (QoQ)

Tuesday April 02

The big story is the RBA statement, where traders will be looking for a repeat the RBNZ dovish line last week. Fed Bostic (dovish, non-voter) speaks today. Argentina's markets are closed today. There is a rate decision on RON (2.5% hold expected)

00:30 AUD Aus Building Permits (MoM)

03:30 AUD RBA Rate Decision/Statement (est 1.5% hold)

06:30 CHF Switzerland CPI

09:00 EUR Eurozone Unemployment Rate

09:30 GBP UK Markit Construction PMI

12:30 USD US Non-defense Capital Goods (est 0.3% prev 0.8%)

14:00 NZD NZ GDT Milk Index

20:30 WTI API Oil Stock

Wednesday April 03

Unusually quiet for a Wednesday on the data front. Watch for the ADP print, an indicator for Friday’s NFP. Fed Mester (hawk, 2019 voter) speaks today. There is a rate decision on PLN (1.5% hold expected)

00:30 AUD Aus Retail Sales s.a. (MoM)

00:30 AUD Aus Imports/Exports/TB

01:45 CNY China Caixin Services PMI

08:00 EUR Eurozone Markit PMI Composite

08:30 GBP Markit Services PMI

09:00 EUR Eurozone Retail Sales (YoY)

12:15 USD US ADP Employment Change

13:45 USD US Markit Services/Composite PMI

14:00 USD US ISM Non-Manufacturing PMI (est 58.7 prev 59.7)

14:30 WTI EIA Oil Stock

Thursday April 04

Another slow data day. Fed Bostic is on again today. There is a rate decision on INR (6.25% hold expected)

06:00 EUR Germany Factory Orders s.a. (MoM)

12:30 USD Jobless Claims

14:00 CAD Canada Ivey PMI

21:30 AUD Aus AiG Performance of Construction Index

23:30 JPY Japan Overall Household Spending (YoY)

Friday April 05

US and Canadian NFPs as always almost guarantee USDCAD volatility. After last month’s shocker, traders will be looking to see if there is any further shutdown effect on the March report. It's the end of the UK income tax year today. Hong Kong and China are closed for Ching Ming.

05:00 JPY Japan Leading Economic Index

06:00 EUR Eurozone Industrial Production s.a. (MoM)

12:30 USD US NFP/AHE/Unemp/Participation (est 175k prev 20k)

12:30 CAD Canada NFP/AHE/Unemp/Participation (prev 55.9k)

17:00 WTI Baker Hughes Rig Count

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on Twitter, Facebook, Stocktwits or Linkedin (all open in separate windows). Details of how I compile the report are here

Week to Jun 1st

Monday May 28

Although markets were closed in the US and UK today, the decline in DAX, driven by Italian concerns was reflected in the FTSE and US futures markets. NKY was down in line. EUR rallied in the Asian session on hopes on resolution in Italy, but then faded the rest of the day to end 0.53% down. However, although AUD and GBP were also down against USD, CAD was flat (along with Oil and Gold), and JPY was slightly up meaning that DXY only put on 0.18% on the day. The bond market was closed.

Tuesday May 29

Concerns about Italy, in particular the prospect of a fresh election in which populists would gain an even larger share of the vote, continued to dominate. Italian bond yields broke the 2% barrier for the first time since 2013, and peripheral markets Spain and Portugal followed suit. All the main equity markets fell hard, as did the EUR. GBP and to an extent risk-on commodity currencies CAD and AUD fell in sympathy, although oil was flat. As money moved into safer US bonds, we saw the triple risk-off test; Gold, JPY and US bond prices (inverse to yields) all up sharply. 

Italy-Germany 10-year bond yield spread

Wednesday May 30

With Monday being a holiday, Turnaround Tuesday was in fact on Wednesday this week. Not as alliterative, but the effect is the same. The trigger was new M5S and Lega coalition talks, ie to avert another election, and the Italian MIB rallied 2.1% after its 8% slide over the previous week, and Italian yields fell, and German and US yields rose, the latter by 7bp to 2.84%

Despite the US misses on ADP jobs (12:15) and GDP and PCE (12:30), US markets also rallied, with SPX recovering all the previous day’s losses, and NKY followed. In Europe, both EUR/DAX and GBP/FTSE similarly recovered, and all currencies were up against USD except JPY which retreated in the risk-on market. Gold followed the weaker dollar, not the risk on, and was up $3 on the day.

Of particular note was CAD which put on an immediate 178 pips (1.37%) on hawkish BoC rhetoric following the rate hold. Oil rallied by 2.4% on reports that the proposed raising of output (mentioned last week) may not be as soon as previously though. This of course also helped CAD.

Brent-WTI spread increasing

Thursday May 31

With Italy out of the way for now, the tariff deadline we mentioned last week arrived, and the US confirmed they would impose steel and aluminium tariffs on the EU, Mexico and Canada. Markets duly retreated again. DAX fell the most (1.4% in the cash session), mainly because of a 7.7% fall in DB after the troubled bank was placed on a US regulator’s ‘problem’ list, but SPX, FTSE and NKY were also down. Currencies were mixed. CAD showed an effect we have seen before. A sharp move in one direction (the hawkish remarks yesterday) is often reversed on the next piece of significant news, in this case the GDP miss (1.3% vs 1.7% est) at 12:30, which faded CAD by 165 pips (1.29%), virtually a complete reversal. Note that this is the kind of move you normally only see with CPI or interest rates, GDP usually has a much lesser effect.

Otherwise it was a dull day for the dollar. EUR was slightly up, JPY and Gold were slightly down, and AUD and GBP were flat. As CAD is only 9.1% of DXY it had limited effect on DXY which closed flat, as did 10-year yields. Oil gave up Wednesday’s gains despite the EIA Stock beat at 15:30. Notably the Brent-WTI spread hit a three year high of $11, reflecting confidence in US shale output. In general non-US oil is priced in Brent.

DJIA repeats futures rally in cash session

Friday Jun 01

Friday saw Italy form a new government, albeit the strange coalition of M5S and Lega, but at least there are no new elections. MIB added 1.5%, and both Spanish and Italian bond yields tumbled. In other good news, NFP figure came in at 12:30 as a healthy beat (223k vs 188k), with average hourly earnings up 2.7% (last month 2.6%) and a beat on unemployment. All indices were up, although of the majors, only SPX and NDX ended with green candles for the week.

The DJIA exhibited a pattern seen many times before on NFP beat, rising in futures immediately after the release, then rising again by the same amount in the cash session. The index took a few minutes before the first rall, so it was particularly easy to trade. Look out for this pattern on future NFP beats.

It was another mixed day for currencies. In general it was a good day for USD, with JPY and Gold down sharply, and Oil continued to fall in line. AUD and CAD were fairly flat, and the only surprise was GBP which rallied all day after the Markit Manufacturing PMI beat (which we signalled last week as significant) at 08:30. Yields were up in line with the dollar, up 6bp at 2.47%.

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

A very flat week for USD on everything except NZD. The best trade would have been to buy NZDJPY for 1.19%, the lowest forex gain for months. Indices were also quieter, with the downward move in the DAX being the largest. Even cryptos were virtually flat.

AUDUSD 0.7565 (+0.27%)

EURGBP 0.8731 (-0.32%)

EURUSD 1.1657 (+0.08%)

GBPUSD 1.3342 (+0.36%)

NZDUSD 0.6986 (+1.07%)

USDCAD 1.2952 (-0.14%)

USDJPY 109.49 (+0.12%)

DAX     12743 (-1.45%)

FTSE     7704 (-0.13%)

NIFTY   10696 (+0.86%)

NKY     22361 (-0.40%)

SPX    2731.6 (+0.52%)

GOLD  1293.78 (-0.53%)

OIL     65.69 (-2.54%)

BTCUSD   7522 (+1.65%)

ETHUSD 579.58 (+1.53%)

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

NEXT WEEK (all times are GMT)

Monday June 04

There are no Fed speakers this week as they are in the purdah period prior to the rate decision next week. Data is also light, although as the UK Manufacturing PMI boosted sterling last week, the Construction PMI may also have a larger than normal effect. BoE Etheridge speak at 15:45, and BoE MPC member Tenreyro (voter, centrist) is on at 17:00.

Tuesday June 05

Australian yields rose sharply last Friday in anticipation of a possible hike today, although consensus is still for a hold. Notably the bank has said that falling house prices (Australian house prices have fallen for eight months in a row) are not a consideration. We now have a partially priced in hike, so expect AUD volatility whatever happens. Also, in addition to a raft of PMIs is the US JOLTS Job Openings report at 14:00. ECB President Draghi speaks along with his predecessor Jean-Claude Trichet in Frankfurt at 13:00. BoE Cunliffe (dove, voter) speaks at 11:00.

Wednesday June 06

Following the rate decision, Australian GDP is estimated to be twice last month’s figure at 0.8%. A miss on this ambitious estimate could reverse any movement upward from the rate decision (or vice versa on a beat after a rate hold). We have three ECB speakers today Praet (dove, voter) at 07:00, Hakkarainen at 13:30, and Angeloni at 16:10. BoE Tenreyro speak again at 09:00, and BoE McCafferty (hawk, voter) is scheduled to do a vox pop Q&A on London LBC Radio.

Thursday June 07

Eurozone GDP rarely makes much of a splash and usually comes in as estimated, as the individual nations have already reported. Of more interest are the CB speakers, BoE Ramsden (voter, position unknown and therefore interesting) at 14:00, and BoC Poloz discussing the contents of the Canadian Financial System Review. Another former CB leader is on today, Ben Bernanke discusses “Lesson Learned from 10 Years of QE” at 18:00. NDX component (1.302%) AVGO reports after the bell.

Friday June 08

Today sees Canada’s NFP and other employment figures, a week after the US NFP. The jobs estimate is not available at the time of writing, but an improvement of last month’s negative figure is likely. USDCAD sharp movement is still expected. Staying north of the 49th parallel, the two-day G7 Summit opens in Quebec. The only CB speaker today is ECB Mersch (hawkish, voter) at 07:15. Markets will also start to position themselves for the following week’s all important US (and EU) rate decisions, where a US hike is widely (91.3% per FedWatch) expected.

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

Mon Jun 04

01:00 AUD Australia HIA New Home Sales (MoM)(time approx)

01:30 AUD Australia Retail Sales s.a. (MoM)

08:30 GBP UK PMI Construction

14:00 USD US Factory Orders (MoM)

23:30 JPY Japan Overall Household Spending (YoY)

Tue Jun 05

23:01 GBP UK BRC Like-For-Like Retail Sales (YoY)

01:45 CNY Caixin China Services PMI

04:30 AUD RBA Rate Decision/Statement (est hold 1.5%)

07:55 EUR Germany Markit Services/Composite PMI

08:00 EUR Eurozone Markit Services/Composite PMI

08:30 GBP UK Markit Services PMI

13:45 USD US Markit Services/Composite PMI

14:00 USD US ISM Non-Manufacturing PMI

14:00 NZD NZ GDT Price Index (time approx)

20:30 WTI API Stock

Wed Jun 06

01:30 AUD Australia GDP (est 0.8% prev 0.4%)

12:30 USD US Trade Balance

12:30 USD US Nonfarm Productivity/Unit Labor Costs

12:30 CAD Canada International Merchandise Trade

14:00 CAD Canada Ivey PMI

14:30 WTI EIA Stock

22:30 AUD AiG Performance of Construction Index

Thu Jun 07

01:30 AUD Australia Imports/Exports/Trade Balance

05:00 JPY Japan Leading Economic Index

09:00 EUR Eurozone GDP (est 2.5% prev 2.5%)

12:30 USD US Jobless Claims

15:15 CAD BoC Governor Poloz Speech

19:00 USD US Consumer Credit Change

Fri Jun 08

02:00 CNY China Imports/Exports/Trade Balance (time approx)

06:00 EUR Germany Industrial Production/Trade Balance

12:15 CAD Canada Housing Starts s.a (YoY)

12:30 CAD Canada NFP/Participation/Unemployment

17:00 WTI Baker Hughes US Oil Rig Count

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