Waiting FOMC and BoE minutes, USD stronger

Market Brief

Dollar bulls received a boost from Benoît Cœuré - member of the Executive Board of the ECB - who announced the ECB will moderately front-load its purchases of euro-area denominated assets in May and June to deal with an expected low-liquidity in July and August. As a result, EUR/USD lost instantaneously one figure and a half to 1.1160 before consolidating ahead of the US Housing Data. The better-than-expected US data dragged lower the single currency toward the strong support standing at 1.1105 (Fib 38.2% on April-May rally) - while all G10 currencies declined against the greenback. A break of the next support standing at 1.1043 would pave the way toward 1.08. The FOMC’s minutes of April meeting will be released today at 6pm GMT and will give further insight on Fed’s optimism on the outlook.

Yesterday, Wall Street followed the lead of London and pushed equities to record high. However, US stock indexes suffered a late sell-off in New York’s session while European equities ended the session in green. This morning, European futures consolidates yesterday’s gains and are trading slightly lower. Footsie is up 0.04%, DAX retreats -0.22%, CAC is down -0.09%, SMI edges lower by -0.04%.

In Asia, Japan’s Nikkei is up 0.8%, boosted by a better-than expected Q1 GDP (0.6%q/q verse 0.4% exp, prior revised downward to 0.3%). China’s Shanghai composite adds 2.15% after a 3% jump in the previous session. Hong Kong’s Hang Seng is unable to keep pace, down -0.19%. The Yen was beat down over the last 24h as the dollar appreciated more than 0.88% against the Japanese currency. The pair finally broke on the upside the resistance at 120.61 (Fib 61.8% on March sell-off) and is heading toward the next which lies at 122.

In Australia, consumer confidence bounced in May by 6.4%m/m (-3.2% prior) to 102.4 from 96.2 after the RBA cut rates earlier this month. A strong dollar helped the Aussie to finally escape its uptrend trend channel on the downside. On the downside, a support stands at 0.7887/48 (previous lows and Fib 50% on April-May rally).

In UK, inflation fell below zero for the first time in more than 50 years. April’s CPI came in at -0.1%y/y versus 0.0% expected while Core CPI edged lower to 0.8%y/y verse 1% consensus, impacted by the drop in food and energy prices. GBP/USD consolidates around 1.55 in Tokyo after the sharp sell-off in London. The sterling did not validate the break of the strong 1.55 support. Once it’ll be done, the road will be wide open to 1.54, then 1.52. The sterling pound was trading broadly higher against G10, losing ground against the dollar, Loonie and Kiwi. EUR/GBP is heading toward the key area between 0.71-0.7150 ahead of the MPC minutes.

Today will be a busy day with unemployment rate from Sweden, Norway GDP, inflation data and retail sales from South Africa, MBA Mortgage application and FOMC minutes from the US and Bank of England minutes.