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Kim Cramer Larsson
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Article / 31 May 2017 at 1:51 GMT

Morning Report APAC: Asia lower ahead of China data; GBP hit by poll

APAC Sales Trading Desk / Saxo Capital Markets
Singapore










  • NZD is the best-performing G10 currency yesterday, and for the month of May
  • GBP tumbles after a UK poll puts the Conservatives at risk of losing their majority
  • Oil and gold both trade lower
  • Oil-related currencies underperform their G10 peers

 

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)


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Speeches

0910 – NZ – RBNZ's Graeme Wheeler at Parliament Select Committee 

1520 – EC – European Central Bank’s Benoit Coeuré speaks in Frankfurt 

1630 – IT – Governor Ignazio Visco speaks at Bank of Italy holds annual meeting 

2000 – US – Federal Reserve’s Robert Kaplan speaks in New York 

2030 – EC – ECB’s Sabine Lautenschläger speaks in Berlin


Overnight news

US:  Core PCE data came in line with expectations at 1.5% for the y/y with m/m number up 0.2%, slightly higher than the 0.1% expectation. 

President Donald Trump tweeted, “We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. This will change.”

The US Federal Reserve’s Lael Brainard says the neutral rate for the economy is very low and may not move higher quickly. Brainard also said the time for a change to the balance sheet is coming soon.

US Commerce Secretary Wilbur Ross says he is open to resuming talks on a mega-trade deal with Europe. This must be conducted at an EU level and not with individual countries, according to Ross.

Europe: German CPI data missed expectations of 1.5%, printing 1.4%. 

French GDP beat expectations, printing 1.0% y/y versus 0.8% expected. Consumer confidence data also beat expectations, however there was a decline in consumer spending of 0.5% y/y versus an expected increase of 0.6%.

Italian producer prices came in very strong, up from 3.4% last month to 4.4% this month.

UK: The latest YouGov poll by the Times showed that the Conservatives are set to lose their majority. Needing 326 seats for a majority and currently holding 330, the latest poll indicates that the Tories would only get 310 seats, leading to a hung parliament. The release of this saw GBP tumble 70 pips.

 

Foreign exchange

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USD was weaker on the day as EUR rebounded from early weakness.

NZD was the best-performing G10 currency yesterday despite the weakness in the building permits data. NZD is also the best-performing G10 currency for the month of May, far outstripping its peers with a total return of 3.4% MTD. A better outlook for both growth and inflation, while also being the highest yielding G10 currency, have been the drivers.

CAD and NOK: The oil-related currencies underperformed their G10 peers as oil was under pressure most of the day before rebounding in the late US session.

Emerging Markets: The mild risk-off tone yesterday saw EM currencies weaken for the most part. The ZAR which fell 1.24% in the wake of another failed bid to remove the corruption plagued president Jacob Zuma. MXN was the next-worst performer as positions were scaled back ahead of the important local elections this coming weekend.


Foreign exchange movements

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Talk of Italian elections in the autumn has seen 6-12 month EURUSD volatilities trade much higher in the previous sessions, while the front end remains very well offered.

JPY risk reversals point towards further downside.

With China off, CNH vols were relatively quiet when compared with spot moves.


Rates

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US yields were lower after the Fed’s Lael Brainard indicated the softness in core inflation, especially at the long end due to month-end buying.

Bund yields fell slightly after German inflation fell more than expected. Peripherals outperformed.


Commodities 

 

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Equities
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US stocks ended slightly lower, with activity relatively muted following the three-day weekend in observance of Memorial Day.

Amazon Inc. reached its $1,000 milestone, hitting an intraday high of $1,001.20, highlighting the growth of the technology behemoth run by CEO Jeff Bezos.

US-listed Ryanair Holdings rose 1.4% after sentiments for Europe’s largest carrier were boosted by passenger numbers that gave profit figures that were largely in line, and a stock buyback announcement.

European stocks dropped almost across the board, with banks leading the way lower and fears over a potential early election in Italy and the Greek bailout program.

The Stoxx Europe 600 Banks Index fell 1%, the worst performing group, after Deutsche Bank lowered banks to underweight from a benchmark rating, saying a slowdown in Eurozone growth is likely to weigh on the sector in coming months.

- IAG ended down 1.4%, but the stock managed to finish off its session lows after hundreds of BA flights were grounded due to a far-reaching failure of the carrier’s computer network.


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NZD was the best-performing G10 currency yesterday despite the weakness in the building permits data. Photo: Shutterstock
 


– Edited by Susan McDonald


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