FX Daily Planet: New York Open

FX Daily Planet: New York Open

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View for the day

The high beta currencies have continued to push higher during the session with both SEK and NOK leading the way. SEK has been boosted following stronger than expected Q1 GDP data with the economy growing 1.4% q/q. Swedish rates are higher with the market now pricing in a 75% probability of a 25bps rate hike in July. NOK has also performed strongly boosted by the rebound in the oil price as it gains a foothold above $75. EUR has made broad based gains, particularly versus NZD, JPY and USD. The news flow from the region has been very light and we suspect that the investors may be taking profit on EUR shorts ahead of the long weekend in both the US and UK. The overall view on EUR remains unchanged. We continue to see the single currency under pressure as the uncertainty over the endgame on sovereign debt and the new found status of EUR as a funding currency ultimately push EUR lower over the coming months. However, for now, and with month-end fixes approaching, the near-term price action is likely to be fairly random. The rebound in high beta FX has seen a further softening in front-end volatility with particularly in the JPY, SEK, NOK and commodity crosses. The afternoon session sees a number of US data releases, but with US equity futures in positive territory, the bounce in the high beta FX is likely to continue over the coming session.

Overnight news

SEK: Q1 GDP is stronger than expected, rising 1.4% q/q. Retail sales are weaker than expected, whilst household lending rises 9.3% y/y.

CHF: Swiss KoF index is much stronger than expected, rising 2.02.

JPY: April nationwide CPI -1.2%oya vs -1.0% consensus and core CPI -1.5%oya vs -1.4% cons; May Tokyo CPI -1.4%oya vs -1.2% cons; April unemployment 5.1% vs 5.0% cons and job-to-applicant ratio 0.48 vs 0.50 cons; April household spending -0.7%oya vs 2.5% cons; April retail sales +0.5%m/m vs -1.0%.

NZD: April building permits +8.5%m/m vs +0.1% in the previous month.

GBP: May Gfk consumer confidence survey -18 vs -16 consensus.

EUR: France’s European affairs minister Lellouche said the euro region’s EUR440bn debt guarantee program marks an “unprecedented” change to the bloc’s treaties, the FT reported, citing an interview.

Today’s watchlist (all times BST; +9hrs for Sydney, +8hrs for Tokyo, -5hrs for New York)

USD: Apr personal income (%m/m, sa) @12:30 (JPM: 0.5, Cons: 0.4); Apr personal spending (%m/m, sa) @12:30 (JPM: 0.1, Cons: 0.3); Apr PCE core (%m/m, sa) @12:30 (JPM: 0.1, Cons: 0.1); May Chicago PMI (DI) @14:45 (Cons: 61.0); May U. Michigan cons. conf. final (index) @14:55 (JPM: 71.5, Cons: 73.3)

CAD: 1Q Current account (CADbn, sa) @13:30 (JPM: -7.3, Cons: -7.5)

Overnight price action

FX: High beta FX continues to rally, notably SEK and NOK.

FX vol: Front-end volatility continues to soften, particularly amongst the JPY crosses.

Commodities: Oil rallies nearly 2% whilst gold rises 0.5%.

Bond Markets: European bond futures are mixed.

Credit: European high grade tightens, 3bps whilst high yield crossover tightens 16bps.

Equities: European equities trade higher

Technical View for the day

The lack of any fresh disturbing news gave risk markets the opportunity to continue working off the oversold market conditions. It is however still highly uncertain how far this relief rally is going to carry, as the whole situation around the sovereign debt crisis with Spain now the main focus, remains very volatile. Yesterday’s breaks above first resistance at 10198/10212 in the DJI and at 1091/95 in the S&P500 is easing the pressure a bit but to really dissolve the general skepticism it would take a break above the 1150 to 1177 resistance zone in the S&P500. Only above the latter risk markets and high beta currencies would be free to reach new highs. As for commodity currencies it would take decisive break below key-supports at 1.2845 in EUR/CAD, at 1.4287 in EUR/AUD, at 1.7724 in EUR/NZD and at 7.8085 in EUR/NOK (76.4 % retracement’s) to indicate a straight resumption of the long-term up-trend. As long as such breaks are not displayed the risk of having only performed a countertrend swing within a broader consolidation persists. EUR/USD has surprisingly lost its down-momentum right above its previous low and shows two failed attempts to surpass 1.2143 which increases the risk of missing another corrective leg up to 1.2735. It however takes a break above pivotal resistance at 1.2470 to confirm the latter. Cable is in this respect one step ahead with good chances to challenge key-resistance at 1.4714 next.

ENDS

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