Market Headlines
Mixed results on Wall Street to round out last week with the NASDAQ finishing -0.2%, while the Dow Jones and the S&P 500 finished +0.4%, and +0.5% respectively.
Oil edged only fractionally higher despite the attack on the Aramco facility while U.S yields continued their run with the 10-year gaining 10bps to 2.48.
AUD/USD closed the week at 0.7514 after earlier peaking at 0.7537, its highest level since November before retreating to finish the session around 0.7520.
European equities opened higher with Euro Stoxx 50 up 0.1% and DAX 0.2% higher. Oil traded around US$116/bbl after the EU refrained from further action on Russian crude. The yield on 10-year treasuries eased by 2bp to 2.35%. Following the open, markets saw the release of Japanese CPI numbers for March which showed inflation increasing by the most in more than two years. CPI was up by 2% while CPI excl. fresh food climbed 0.8% as energy prices rose by 26%. Earlier in the week Governor Kuroda said inflation dynamics were different to that in Europe and the US, and there was ‘no need to follow rate hikes of other nations’.
There were headlines that Putin plans to demand ruble payments for natural gas from “unfriendly” nations, including the US and UK, meanwhile the US and EU reached an Energy Supply Deal to cut energy dependence on Russia. Risk was a little softer in response with EUR/USD touching lows of 1.0995 before rebounding to 1.1016. Elsewhere and GBP/USD hit highs of 1.3224 while USD/CAD moved down to lows of 1.2518. An Interfax report suggested that the Russian military would focus on the full liberation of Ukraine’s Donbas region and that it was not planning yet to storm blocked Ukrainian cities. US yields moved sharply higher on the news, with 10-year treasuries rallying 12bps to 2.47% and USD/JPY moved higher back above 122.20.
In US data, the University of Michigan Sentiment Survey for March reached its lowest level since August 2011, as it declined to 59.4 (vs expectations of 59.7) relative to the prior month of 62.8. Pending Home Sales for January were -4.1% MoM, falling well short of expectations of +1%. Little reaction to the data. Wall St opened mixed with the Dow and S&P moving 0.5% higher while the Nasdaq was slightly lower at -0.3%. However, the early gains were largely given up as a significant fire was reported at an Aramco facility in Saudi Arabia’s Jeddah following a reported missile strike from Yemen rebels. Oil prices bounced off their lows on the news with Brent trading back above US$120/bbl.
Currencies
The AUD hit its highest level since November with AUD/USD trading up to 0.7537 as it continued its commodity price rally, while the NZD/USD fell to 0.6953. EUR/USD fell towards 1.0995 and GBP/USD fell to 1.3161. USD/CAD climbed to 1.2553 as USD/JPY reversed towards 121.58 after hitting 122.45, its highest level since December 2015.
AUD/USD continued to be range bound in the NY afternoon, falling briefly below 0.7500 at the London rate set before recovering to trade back above 0.7520.
Currency ranges over the last 24 hours
Market Outlook
A quieter start to what is potentially a busy week on the data calendar. Friday’s US employment report will dominate investor interest while there will be a close eye on their ISM data, China’s PMI and Australia’s Retail Sales.
The Bank of England’s Bailey (Monday) and Broadbent (Wednesday) will offer their latest views on the outlook for policy settings, given the war in Ukraine. The next policy decision is not until May 5th though – still a long way off, which ordinarily would mean limited scope for a major reaction. However, the OIS rate has just 31bps of further tightening priced in for that meeting, so any suggestion from Gov Bailey (in particular) that a 50bps hike is on the table should give sterling a strong boost.
AUD/USD traded in a 0.7495/.7537 range on Friday with offering interest still expected ahead of 0.7550 while demand has increased and rests ahead of 0.74c.