• Headlines then that the EU confirmed that Italy risked disciplinary processes over its debt. While this appeared to be a rerun of an earlier article, EUR/USD slid to new lows of 1.1141 ahead of data releases with the USD firm overall. NZD/USD also to new lows of 0.6511. With the BOC decision not far off, USD/CAD returned to the 1.3510 area having earlier fallen back towards 1.3480.
• The Bank of Canada left rates on hold as widely expected and released an upbeat statement, noting that recent data confirmed that the slowdown in late 2018 was temporary. They would remain data dependent with an eye on the household sector, oil markets and global trade tensions and noted trade risks had increased though stressed that current policy settings remained appropriate and made no mention of returning to a neutral stance. Despite the hawkish slant, USD/CAD initially spiked higher to hit 1.3547 highs though quickly settled near 1.3510 levels.
• In geo-political news, Special Counsel Mueller made a very rare public appearance in giving a short statement about his report into interference in the US election. He repeated the main findings though stressed that if he was confident that President Trump clearly did not commit a crime he would have said so but did not and that charging the President was no at option due to DOJ guidelines. Trump replying shortly after on Twitter that the “case is closed”.
• The USD making further gains over the NY afternoon with the antipodeans down to new respective lows of 0.6904 and 0.6504 while EUR/USD fell to 1.1124 and GBP/USD dipped to 1.2612. USD/JPY popping to 109.70 highs in late trade while USD/CAD settled mid-range.
• Wall St remained soft into the close with the Dow -.90% at 25126, S&P -0.9% at 2780, NASDAQ -0.8% at 7547.
• The US dollar index is up 0.2% on the day.
• EUR fell from 1.1170 to 1.1125.
• USD/JPY rose from 109.15 to 109.70, the safe-haven yen performing surprisingly poorly.
• AUD was resilient, falling from 0.6930 to 0.6904 but then rebounding to 0.6915.
• NZD fell from 0.6550 to 0.6504.
• AUD/NZD rose from 1.0580 to 1.0630 - a surprising result given the risk-averse mood, and partly explained by extended positioning as well as some pundits suggesting the RBA won’t cut as much as the market expects.
• FTSE -1.1% at 7185, DAX -1.6% at 11838, CAC -1.7% at 5222, Nikkei -1.2% at 21003, ASX 200 -0.7% at 6440, Shanghai Comp +0.2% at 2915
• Dow -.90% at 25126, S&P -0.9% at 2780, NASDAQ -0.8% at 7547
• US 2yr yield -2bps at 2.11%. US 10yr -1bps at 2.26%. VIX Volatility +2.1% at 17.87
• Commodities CRY +.1% at 180.34, Natural gas +1.5%, Cotton -0.6%, Crude Oil -0.4%, Copper -1.3%, Wheat -2.8%, Sugar +1.0% Gold at $1280/oz
• Damage to global risk-off continues to take its toll on the Aussie pair.
• Australia’s housing and private capital expenditure data are in the spotlight.
• The US GDP will also grab headlines.
Having declined on the negative catalysts for the Antipodeans, the AUD/USD pair is trading near 0.6920 during the early Asian session on Thursday. Not only rising tension between the US and China, recently due to China’s signal to cut rare earth exports to the US, but sluggish manufacturing data from the US also contributed to the Aussie pair’s weakness.
Providing additional toll to the pair sentiment was its appeal as a risk barometer. Global investors have been running towards risk safety off-late mainly because of the US-China trade tension and the same weigh on the Australian Dollar (AUD).
Another such risk barometer is global treasury yields that are in red recently with the US 10-year benchmark under the 3-month yield. Looking forward, April month data for HIA new home sales, building permits and first quarter (Q1) reading of private capital expenditure will be in the spotlight together with trade war developments.
While new home sales declined -0.1% earlier, private capital expenditure may soften to 0.5% from 2.0% previous. Further, building permits could flash 0.0% mark versus -15.5% prior on a monthly basis. It should also be noted that yearly building permits growth figures were down at -27.3%.
At the US, all eyes will be on the preliminary gross domestic product (GDP) data for Q1 2019 with April month pending home sales likely entertaining investors then after. The US GDP annualized is expected to soften to 3.1% from 3.2% while pending home sales might decline to +0.9% from +3.8% earlier
The recent high surrounding 0.6940 limits the pair’s near-term upside, a break of which can recall 0.7000 and 50-day simple moving average (SMA) level near 0.7040.
Alternatively, 0.6900, 0.6860 and the year 2016 low near 0.6830 seem important downside supports to watch.
Event Risk Data
• Australia: Q1 private capex is anticipated to increase 0.5%. Westpac sees a more subdued 0.2% rise with softness in building and structures while equipment posts a modest gain. 2019/20 capex plans estimate 2 expectations centre on $96bn (Westpac fcs $97bn) but note the first two estimates can be unreliable. Apr dwelling approvals are expected to be flat (Westpac fcs -1%).
• US: Q1 GDP 3rd estimate is anticipated to be revised marginally lower to 3.0% annualised for the quarter from 3.2%. Apr merchandise trade (advanced), wholesale inventories and pending home sales data are released. Fedspeak involves Clarida on “Sustaining Maximum Employment and Price Stability”.