The US$ strengthens, oil prices weaken, equity markets are up, while US yields are mixed as risk sentiment improves on rates and First Republic Bank. A quieter start to trading with China, Europe & UK are off with May 1st holidays. US FDIC announced First Republic Bank (FNB) has been seized and a deal has been agreed to sell the bank to JPMorgan Chase, FNB is the 3rd US bank to fail in two months. This week the Fed & ECB will announce their interest rate decisions on Thursday May 4th, both central bank are expected to hike by 0.25% with investors focused the respective central bank's monetary policy statements. This week alongside the ECB & Fed monetary decisions, Monday CAD Manufacturing PMI, US Manufacturing PMI, Tuesday AUD Rate Decision, German Retail Sales, EUR Inflation report, Wednesday US ADP Employment Change, ISM Services PMI, Thursday Apple Earning report, BoC Gov Macklem speech, US Initial Jobless Data, Friday EUR Retail Sales, US Nonfarm Payroll, CAD unemployment Data.
In other news. Sudan crisis has potential to be 'worse than Ukraine' for civilians, says UN official. Chinese factory activity declines in April on weak global consumption (FT). Russia strikes rail hub in eastern Ukraine in new air strikes. Macron faces labor day protests as pension reform anger festers. Tentative agreement reached with federal government for 120k public servants, union says (CBC). Berkshire Hathaway Charlie Munger reportedly warns of trouble for the US commercial market (CNBC). In the UK nurses to hold their biggest strike yet and warn strikes to go on.
In currency markets. The US$ index edges higher in thin trading, while currencies hold in limbo awaiting the Fed & ECB interest rate decisions. CNY holds steady despite the combination of ECB & Fed hikes and weakening Chinese factory activity. ZAR remains under pressure from ongoing rolling blackouts and the budget fails to offer much relief to investors. CNY is up 0.15%, while Asian currencies are flat on average. Trading currencies are mixed with NOK & ZAR weaken 0.6%, JPY & SEK down 0.25%, NZD slips 0.1%, while CHF & MXN firm 0.1%, AUD gains 0.25% vs US$.
Oil prices fall 2% as economic growth concerns, expected further hikes by the Fed this week offsetting OPEC+ output cuts. C$ weakens in early trading as commodity prices remain under pressure and expectations that the Fed will hike rates on Thursday widening the interest differential vs the BoC. Domestically investors BoC is expected to keep interest rates paused as Canada's economy geared down in Q1, giving the BoC confidence that their monetary stance is sufficiently restrictive to bring inflation back to the 2% target by the end of 2024. The week expect the loonie to remain under pressure heading into the Fed rate decision on Thursday. Today CAD & US PMI data will help provide intraday direction to markets. Support resets to 1.3525 while resistance holds at 1.3640.
EURCAD is flat in early trading as markets are thin with the EU holiday. The primary driver this week will be the ECB rate decision on Thursday. Support holds at 1.4900 while resistance remains at 1.5000
Euro steadies near 1.1000 vs US$ in thin trading and a firming US$. Euro trading has been modest as investors are sidelined with the May day holidays and ahead of a key week of economic data as well as the ECB & FED rate decisions. Improving risk sentiment is expected to cap short-term US$ strength, ahead of the Key interest rate decisions on Thursday. Today US PMI data will provide intraday direction to markets. Support holds at 1.0950 and resistance remains at 1.1050.
GBPEUR slips in quiet trading, but into the ECB expected rate hike we anticipate the pound to come under fresh selling pressure. Support sits at 1.1330 while resistance lowers to 1.1400.
GBP slips vs Euro and US$ ahead of upcoming the respective central bank rate decisions. The pound appears to be faltering towards its 10-month highs vs US$ and a bearish momentum is growing with expectations further pound weakness in May. Across the UK local elections which take place on Thursday 4 May and is expected to be a tough first electoral test for Prime Minister Rishi Sunak. Intraday US PMI data will be provide short term direction, but expect markets to be somewhat sidelined until May 4th FED/ECB rate decision and UK local elections. Support holds at 1.2460 while resistance sits at 1.2550.
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