Morning brief for April 21
It was a busy week so far and I hope you managed to make a few pips for yourself, or minimize your losses. There is a fair bit of the news to digest overnight, and there were many market price actions across the trading desk.
US equities and bond yields climbed owing to remarks from US Treasury Secretary Steve Mnuchin. Yesterday speaking at an Institute for International Finance event he backed off of his earlier goal of passing tax reform by August and added that the White house will reveal a tax plan “very soon” (I bet it should mean something; remember Fed’s chorus ahead of the March hike). He also said that the US tax overhaul won’t necessarily be tied to first completing the reform of the Obamacare (citing Mnuchin "whether health care gets done or health care doesn't get done, we're going to get tax reform done").
The euro wasn’t spooked by a terrorist attack on police officers in Paris just a few days before France’s presidential elections. The first round of voting is scheduled for Sunday, and the two front-runners will clash in a winner-takes-all contest on May 7. The first-round voting finished at 7 pm in Paris, the earliest exit polls will be released at 8 pm. But these are not actual results (we wouldn’t trust them after Brexit referendum and Trump’s victory). Low turnout would be supportive for Le Pen and Melenchon as their electorate is most likely to turn up at the polling stations. EUR/USD is trading smoothly along 1.0715. There is a room for extension towards 1.0775. On the downside, we see several supports at 1.0690, 1.0660.
Data wise, there will be Eurozone, French and German preliminary PMI figures at 10 am MT time. The data could affect the euro, especially if there is a streak of the data with significant deviations from consensus forecast.
USD/JPY rose to 109.50 overnight after bank of japan Governor Haruhiko Kuroda said that he will keep the accommodative policy in place as long as it needed to hit the BoJ’s inflation target. He noted that Japan’s economy is doing better than it is projected in the past two months, but inflation rates are still quite sluggish. So, there is no need in tapering the current bond purchasing program; the board is not constrained by the fact that it has already acquired 40% of JGBs (“other 60% is still in the market"). For the present time, it is too early to expect a massive rebound. However, quotes might be up to test 109.80/109.85 and higher levels. If there is a rollback, we would pay attention to 109.05, 108.85 levels.
Aussie edged up to 0.7535 due to surging iron ore prices. Kiwi lost a few points in the early hours of the Asian session after jumping to 0.7050 on the release of upbeat NZ inflation data yesterday. Now, NZD/USD is trading near 0.7005 having hit a consolidation phase overnight.
USD/CAD fell below 1.3465. Today’s focus will be on the Canadian CPI figures coming at 3:30 pm MT time. They might be a boost for the Loonie in case of an uptick in inflation figures.