Europe news-flow slows after yesterday's exchange

Yesterday’s market action

The majority of movement was generated by inflated headlines from unnamed Greek Government sources saying that both Greece and Creditors were commencing a Staff Level Agreement. This would mean low primary budget surpluses, tax overhauls and most importantly a short-medium term accord on Greek Sovereign debt relief. This allowed European bourses to lift temporarily as we saw a medium-scale risk-on move filter through. The bund also fell from its highs in an inversely correlated move- this was however short lived as we had contrarian comments from Dombrovskis countermanded any claims by Tspiras, who supported the unnamed official’s claims by stating that a deal with creditors was close. This sparked a minor retracement of the moves made with the majority of European bourses struggling to make any further headway higher but remaining comparatively elevated despite negative commentary. Dombrovskis releases a statement saying “we do not yet have the catalyst that will allow an agreement...we are already basically a month behind schedule.” Traders were on the whole surprised at the lack of downside reaction in the wake of these comments. Overnight we saw the API crude numbers released; the headline figure showed a build of 1268k barrels against the previous of -5200k. This will provide a bearing for the DOE release later on this afternoon, delayed by a day due to the bank holiday on Monday.

Today’s View

Moving on from the Euro-circus of yesterday’s trading session, today saw the release of UK preliminary GDP for Q1. We saw a small miss on expectations which resulted in a choppy period initially before making new lows on the session. GBPUSD has since tested the 1.5300 handle, finding psychological support. This afternoon we see a break in the dearth of data releases with Initial Jobless claims, still printing the best rolling 4 week-average for the past 15 years. Continuing claims are also expected with a reading of 2195k- look for excess dollar reactions if we see the actual figure surpass the high/low of the range. We also have Pending home sales for the month of April expected at 0.9% for the monthly reading and 10.80% for the annual reading. We also have the Department of Energy’s weekly inventory releases with a draw-down of -1500k barrels expected. However with the build in supply from the API reading, there is a chance we could see some oil down-side as supply could increase. This will be exaggerated if we have good US data this afternoon and further dollar strength. A second print to watch out for is the Gasoline inventory number; overnight we saw a significant drawdown in API inventories so it is likely we will see similar figures in the DOE figure today. The easiest trades are likely to be in the dollar and T-notes with equities demonstrating possible confusion as traders react to the interest rate hike date. Although we had comments from the Richmond Fed President Lacker saying that a June hike is still on the table, it is likely that the date will be both data dependent over a number of months. With poor US data in the past few monthly prints it is unlikely that the June hike will go ahead.