Today's most important release is the US CPI release at 14:30 CET

Sverre Holbek, CFA Danske Bank A/S

Market movers today

Today's most important release is the US CPI release at 14:30 CET. We estimate the core index rose 0.2% m/m in March, implying an increase in the CPI core inflation rate to 2.1% from 1.8% due to base effects (the CPI core index dropped 0.1% m/m in March 2017 due to, among other things, wireless telephone services).
Also, we get the FOMC minutes tonight at 20:00 CET. We will look for comments on a possible regime shift to price level targeting and comments on the increasing Libor/OIS spread.
In the UK, the NIESR GDP estimate for Q1 18 is due out at 13:00. Based on the PMIs, GDP growth likely fell to 0.3% q/q in Q1 18 from 0.4% q/q in Q4 17.
In Sweden, the Prospera's monthly money market inflation survey is released this morning, see page 2.

Selected market news

Yesterday, we saw a quite volatile trading session in the afternoon. While there were no data releases driving the market, comments from Austrian central bank governor Ewald Nowotny sent rates higher and EUR stronger. Nowotny commented in a Reuters interview that in his view the ECB could hike the deposit rate before moving the main interest rate . He also commented on a first rate hike being 20bp. Unprecedented, an ECB spokesperson stressed that the comments were Nowotny's own view. ECB spokespeople never comment on views shared by the individual governing council members, so that in itself was striking. Regarding the size and timing of the first hike, we have previously discussed what we expect goes into the ECB's decision making process, see ECB Research: 10bp, 20bp or ...? ECB in uncharted waters , 20 March 2018.

Following the escalation of the US-China trade dispute on Friday, we have seen multiple signs that support the picture that it is part of negotiations to reach a deal rather than Trump taking China into a trade war. We thus still expect the endgame to be a deal between the US and China and that the situation will be resolved without a trade war . Last night Trump tweeted: 'Very thankful for President Xi of China's kind words on tariffs and automobile barriers...also, his enlightenment on intellectual property and technology transfers. We will make great progress together!', which is a sign of consolidation, see Flash Comment: Encouraging signs in the US-China trade conflict , 10 April 2018.

The oil price reached a new year high yesterday on broad based support from the weaker USD, better risk sentiment in markets and bullish comments from Saudi Arabia targeting a higher oil price in the future.

Download The Full Daily FX Market Commentary

Author

Sverre Holbek, CFA

Danske Bank A/S

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

The French bond panic is overdone. Here's what the market is misreading

France's 10-year government bond yield has climbed above 5%, reigniting fears of a sovereign debt crisis in the Eurozone. With public debt exceeding €3.5 trillion, persistent budget deficits and a fragmented political landscape, investors are increasingly questioning the French government's ability to stabilize its finances.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.