FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
The euro was boosted by a report in the Greek press suggesting that a “new” deal with the EU/IMF/ECB is “imminent”. The AUD rallied in relief when Q1 GDP data did not prove to be as bad as feared. EURUSD traded 1.4366-1.4437, USDJPY 81.15-81.57. Asian equities are flat at the time of writing, although the S&P 500 closed up 1.06% on the day. The S&P/Case-Shiller home price index dropped more than expected and both the Chicago PMI and Conference Board Consumer Confidence Index fell unexpectedly. Upcoming data releases include the ADP employment change reading. The correlation between the ADP print and the official BLS private payroll figure has improved but is far from perfect. Nevertheless, the ADP print will be watched for any hints regarding Friday’s BLS release and any disappointment on the ADP print will likely weigh on the dollar.
EUR
The Greek press reported that a new deal between the Greek government and the EU/IMF/ECB is “imminent”, and that an unscheduled meeting of European finance ministers will take place on Monday, June 6 “to decide whether to release a fifth tranche of funding”.
Dutch Central Bank Governor Wellink noted it was “much too early” to discuss Greek restructuring.
The flash Eurozone CPI estimate for May was softer than expected at 2.7% (cons. 2.8%), while German unemployment only fell by 8k, softer than expectations of a 30k decline. Our European economists still expect the ECB to hike rates again in July.
GBP
Outgoing Bank of England MPC member Sentance said that if inflation does not come down in the way the majority on the MPC expect, “the credibility of the bank’s commitment to its inflation target” will be undermined. He added that we need to take very seriously the value of sterling.
AUD
Q1 GDP came in slightly worse than expected at -1.2% q/q (cons. -1.1%) and +1.0% y/y (cons. +1.0%). The AUD got a strong boost however as there had been fears the data could have been much worse after yesterday’s very weak net exports data.
CAD
The BoC kept its policy rate on hold as expected. Officials cited CAD strength as a headwind and said that any reduction in policy stimulus would need to be carefully considered. But they did note that, “to the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be eventually withdrawn.” That represents an adoption of a slight hawkish stance and the CAD deservedly received a boost
Finance Minister Flaherty said Canadian interest rates will rise, but the only question is on the timing.
TECHNICAL OUTLOOK
USDJPY 80.70 support
EURUSD NEUTRAL Move above 1.4455 would signal scope for gains towards 1.4569, Fibonacci level. Support lies at 1.4257.
USDJPY BEARISH Momentum is negative; break below 80.70 would open 80.34. Near-term resistance is at 82.00.
GBPUSD BULLISH Focus is on 1.6547, break of this level would open 1.6584. Near-term support is at 1.6379.
USDCHF BEARISH Support at 0.8465 holds, break here would expose 0.8400. Resistance lies at 0.8663.
AUDUSD BULLISH Break of 1.0794 would confirm the bull trend and pave the way for gains towards 1.0889. Support lies at 1.0643.
USDCAD NEUTRAL Sharp fall through 0.9675 has exposed support at 0.9631/00 area, while resistance lies at 0.9772 ahead of 0.9816.
EURCHF BEARISH As long as resistance at 1.2360 remains intact, watch support at 1.2156 and 1.2102.
EURGBP NEUTRAL Recovery through 0.8752 has exposed 0.8776 ahead of 0.8800. Initial support lies at 0.8667.
EURJPY NEUTRAL Initial resistance is at 118.00 ahead of 118.38. Support is at 115.57.
SCHEDULE
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