The Commentariat Makes A Big Deal Of Yellen's Comments, Markets Don't


 Disappointing German, French, and Italian PMI reports helped send the euro to almost $1.1985, its lowest level in about two and a half weeks, and weighed on other regional currencies.  The dollar-bloc currencies are doing firmer, led by the New Zealand dollar.  The Reserve Bank of New Zealand indicated it was prepared to tighten mortgage restrictions further, and it reported an unexpected decline in unemployment in Q1.  Emerging market currencies are mostly lower, led by Eastern and Central Europe.  Asian currencies were quiet, with China, Japan, and South Korea markets closed for holidays.

The JP Morgan Emerging Market Currency is lower for the second session and the fourth in the past five.  The large equity markets in the Asia Pacific region were mixed.  Hong Kong and Taiwan fell, while Australia and India posted modest gains.  Europe's Dow Jones Stoxx 600 is up over 1.3%, for what could be its biggest gain in two months, led by materials, information technology, energy, and industrials.  US futures are 0.3%-0.5% better.  The US 10-year yield is slightly firmer at 1.60%, while European yields are 1-3 bp higher.  New Zealand's benchmark jump 4.5 bp (to 1.70%), while Australia's yield slipped a couple basis points (to 1.73%).  Gold again was capped below $1800 and consolidated ahead of yesterday's lows (~$1771).  A sharp fall in US oil inventories, according to API, is helping oil continue its rally.  June WTI is higher for the third session and six of the past seven.  This follows the 7.4% advance last month.  The June contract is extending yesterday's gains above $66.  This year's high was set in early March near $67.30 (OIL).  

Asia Pacific

China and Japanese markets open tomorrow for the first time this week.  Japan will report labor earnings and the final PMI. The preliminary estimate of the composite was above the 50 boom/bust level for the first time since January 2020 and the highest since September 2019.  China reports the Caixin PMI for non-manufacturing and the composite.  It may also report the April trade figures.  In dollar terms, the surplus is expected to double to $28 bln from $13.80.  On a year-over-year basis, imports are forecast to grow faster than exports, as they did in March.  April reserve figures may also be released.  A small increase is expected to $3.2 trillion.  

The dollar is in about a 30-pip range below JPY109.50 today. However, it remains within the range set on Monday (~JPY108.90-JPY109.70).  Recall that before the Japanese holiday, the dollar finished last week near JPY109.30.   Japanese leadership is arguably awaited.  Australia reported a 17.4% jump in building approvals, as its property market remains strong.  The Bloomberg survey median forecast was for a 3% gain, but the Australian dollar is within yesterday's range (~$0.7675-$0.7765).  It finished last week near $0.7715 and is slightly higher now.  An expiring option for A$960 mln at $0.7750 may be a stretch.  The New Zealand dollar is also inside yesterday's range (~$0.7115-$0.7205) but has resurfaced above the 20-day moving average, which it settled below yesterday for the first time since mid-April.  A move above $0.7600 would lift the tone.  The greenback is firmer against the offshore yuan for the second consecutive session.  It is the first back-to-back gain in nearly a month.  Recall that it settled near CNH6.4735 before the mainland markets shut for the extended holiday.  It is now trading near CNH6.4875, warning of downside pressure on the onshore yuan tomorrow (FXY, CYB, FXA).  

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Read more by Marc on his site Marc to Market.

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