Sverre Holbek, CFA
Danske Bank A/S
Market Movers
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In terms of data releases, today is set to be a fairly quiet day.
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In the UK, focus will be on the release of NIESR GDP estimate for March, as the estimate in February suggests that growth in Q1 has been around 0.3% q/q, much lower than in Q4 when the economy grew 0.6%. Also, industrial and manufacturing production figures for February are due.
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In Europe, the ECB’s Mersch and Nowotny will be speaking, while the Fed’s Dudley and George will present their views on the US economy.
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In Sweden, SCB is due to report the March consumer spending indicator. Based on the retail sales number, we expect flat sales m/m. In Denmark, current account and trade data are due.
Selected Market News
Cameron involved in Panama scandal. Yesterday, reports emerged that the UK Prime Minister’s father had links to a fund cited in the leaked files of a Panamanian law firm, from which David Cameron had personal gains (see link). While it is quite uncertain what the potential political impact will be, timing could be critical as Cameron is currently trying to persuade voters to vote to remain within the EU at the 23 June referendum.
The yen is touching new highs, intervention could be imminent. Following last week’s dovish comments by Fed Chair Janet Yellen, the yen has strengthened nearly 6% versus the USD, causing USD/JPY to dip below 108. Yesterday’s Japanese officials issued warnings about ‘one-sided moves’, a phrase that has previously been used to signal that intervention could be imminent.
Sentiment on financial markets turns sour again. After sentiment improved slightly in the middle of the week, most bourses ended in the red yesterday as worries on global growth returned to the forefront. Also, focus is gradually shifting to the US corporate earnings season, which is due to be kicked off by Alcoa Inc on 11 April. According to Bloomberg (link), profits are expected to fall 9.5%, the worst in more than six years and the fourth straight decline. Treasuries were well supported, with the 10-year yield falling below 1.70%. In Europe, equities also fell. The 10-year Bund yield closed below 0.10%, while the weaker sentiment saw particularly Italy and Portugal being sold off.
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Editors’ Picks
AUD/USD remains firm above 0.6600 ahead of RBA
AUD/USD maintains its bullish bias well and sound on Monday, extending the multi-session recovery past the 0.6600 barrier ahead of the key interest rate decision by the RBA.
EUR/USD keeps the constructive tone near 1.0800
EUR/USD started the week in a positive note amidst the Dollar’s inconclusive price action, altogether motivating the pair to attempt a move to the proximity of the 1.0800 region, where the 200-day SMA also converges.
Gold holds on to modest gains around $2,320
Gold trades decisively higher on the day above $2,320 in the American session. Retreating US Treasury bond yields after weaker-than-expected US employment data and escalating geopolitical tensions help XAU/USD stretch higher.
Bitcoin price holds above $63K as MicroStrategy tops BTC ownership list
Bitcoin (BTC) price recorded a rather bold two days this past weekend in a surge that saw millions in positions liquidated. However, the week is off to a calm start with altcoins sucking liquidity from the BTC market.
Stagflation warning: Service economy contracts as prices rise
In another stagflation warning sign, the U.S. service sector contracted in April even as service prices rose. The Institute for Supply Management's non-manufacturing PMI dropped to 49.4 in April, dipping from 51.4 in March.