Dollar rebounds, FTSE falls

A fairly choppy start to proceedings this morning with miners dragging the FTSE lower and the dollar staging a small rebound in the face of the recent sell-off.

Gold has pared some recent gains and trades around $1280/oz while oil is fairly stagnated, remaining below the $44/bbl level for now.

Money is moving into the US treasuries as the US dollar rebounds from its lowest levels in a year. Hawkish comments from Federal Reserve (Fed) members revived expectations amongst some that a June hike could still happen. But the poor Q1 earnings out of the US and a weaker-than-expected GDP growth will certainly keep the Fed-bulls on their guards before the US jobs data.

The key macro highlight of the day is the US ADP employment report (consensus 195K versus 200K last month); a strong read could enhance purchases in the USD before Friday’s nonfarm payrolls, unemployment and wages data. But a soft ADP read could quickly curb that appetite. In any case, one has to question the importance of this data set lately. Lack of inflation and global headwinds seem to be a bigger deciding factor for Yellen and with the EU referendum just round the corner, a hike in June will only add to the almost-guaranteed volatility

The EURUSD has retreated below the 1.15 mark; the critical 1.1460 (major 38.2% on April 25 – May 5 surge) could come under pressure. Breaking below this level, the short-term bearish reversal could encourage a further sell-off. Technicals would suggest some consolidation in the pair with a small bias to downside presently but any push through 1.1535 would put the 1.16 level back in the frame. Having topped out at 1.4770 yesterday, cable has now relinquished the $1.45 level too – UK construction PMI was released at 9.30am and showed an even deeper fall back to 52 against a forecast of 54. While below the 1.45 metric there is a propensity for further downside. There is still a possibility that markets will continue to climb that wall of worry ahead of the EU referendum and much attention will be closely paid to voting polls so we cannot discount a move up towards $1.50 in the next few weeks.

Miners go up, miners go down. Its seems the latter if reflective of today’s action on the FTSE which underperforms its European counterparts as BHP, Randgold and Anglo take the bottom spots and erode 6 points from the index.

Sainsbury is also under pressure – down 5%. Pre-tax profits recovered to £548m in the 52 weeks to March 12 from a £72m loss a year earlier, which had been the group’s first annual loss in a decade.

We call the Dow Jones 20 points lower.