Stronger dollar effect could be in play after US Trade Balance

Last week’s market action

After a week out of the markets I have returned to see the Bund tumble from its pinnacle, falling a full four and a half prices to current levels, a dovish FOMC statement, and the Australian Central Bank cut rates. Looking into the week ahead we have some heavy-hitting releases with Non-Farm Payrolls on Friday and the UK General Election/unpopularity contest on Thursday-Friday. In light of such a busy week I will attempt to keep this brief and to the point.

Continued positive earnings allowed the major US bourses to remain elevated. Yesterday, although the majority of UK market participants were off, saw US data print positively as Factory Orders beat expectations with a reading of 2.1% and the ISM New York figure printed 58.1, up from the 50 printed for March. We also saw commentary from Fed’s Evans yesterday leaning towards a dovish outlook, countermanding the hawkish rhetoric from Williams and Mester. Evans commented that there were “significant risks but few benefits” to raising rates sooner rather than later; after the FOMC statement last week it is likely that any commentary from FOMC members will be overlooked as we had the bulk of the rhetoric presented to us last week. Yesterday saw the Financial Times print an article, distributed in its edited form this morning, which outlined the IMF’s potential to remove financial support to Greece unless their European lenders write down portions of sovereign debt. Later today sees the Deputy Greek Finance Minister, the aptly named Dragasakis, meet with Draghi to present Varoufakis’ proposals- the perfect middleman for the job.

Today’s View

This morning we saw HSBC report earnings this morning; a beat on the pretax figure of $7.1bn against $5.8bn expected and a fall in operating expenses proved bullish over the past few days but, with the realisation of the number there has been some profit taking in this morning’s session. We saw a fall in the UK Construction PMI for April printing lower at 54.2 against the expected 57.4. This resulted in a push lower below pivot but has since returned to its highs, consolidating around the technical level. Ahead today we have the US trade balance figures due at 1330BST, estimated at -41.3bn. The stronger dollar effect could be in play here so please be prepared for any extraneous readings on the headline. We also have US Services PMI for April; this is the final reading for this data release so is likely to have less clout than the other figures printing today. We have the ISM Non-Manufacturing for April at 1500BST expected with a reading of 56 and this is likely to be the big release of the afternoon. We also have API Crude Oil Inventories printing overnight; please be aware of this number for tomorrow as we have the D.O.E it will be a telling indicator, now that sensibility and order has been restored to the inventory numbers over the past few weeks. This is also likely the first piece you will read today that doesn’t mention the Royal Baby.