Spot values at a glance:
Asian equities gained, extending a relief rally that swept across global financial markets in the wake of the French elections over the weekend. Chinese equities pared some of its declines after a recent selloff, while the yen weakened with gold.
- President Trump will call for cutting taxes for individuals and lowering the corporate rate to 15% to fulfil a promise he made during his campaign, according to a White House official. The president on Wednesday plans to make public the broad outlines of what he wants to change in the tax code, though the details likely will be left until later negotiations among congressional leaders and officials from Treasury.
- The Chicago Fed National Activity Index in March fell to 0.08 from 0.27 in the month prior, less than the 0.50 expected. The Dallas Fed Manufacturing Activity gauge slipped to 16.8 in April, from 16.9 in March, lower than the predicted figure of 17.0.
- Following a global relief rally in risk assets after France’s election left centrist Emmanuel Macron on track for the presidency, which also eases concerns that the nation will leave the EU, all 3 US major indices ended up with gains of more than 1%. The benchmark S&P 500 Index ended 1.1% higher, to close within 1% of its all-time closing high.
- The US dollar pared Monday’s declines, with the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, rising 0.2%.
- The benchmark 10yr Treasury yield added 2bps to 2.27% in New York, paring an earlier gain of as much as 7bps. US yields were driven up as bonds sold off as investors spurned traditional safe haven assets, but pared gains towards the end the day amid the prospect of a US government shutdown at the end of this week.
- Should a spending bill fail to get passed by both Houses of Congress by midnight on 28 Apr., the federal government would effectively be shut down, although emergency services would continue. White House spokesman Sean Spicer said last night he is “very confident” a government shutdown will be averted but cautioned there are no guarantees. President Trump has been pushing for funding for a wall between the US and Mexico, but it’s unclear if a bill including that money will get enough votes to be passed.
- Us President Trump told conservative media reporters his administration plans to place a 20% tariff on softwood lumber entering the US from Canada, according to a White House official with knowledge of this conversation.
- According to One America News Network reports, Canada may be subject to further import tariffs on dairy products coming into the US. Trump has recently stated the Canadian system of protectionist dairy quotas is harming US farmers.
- Emmanuel Macron has received endorsements from former Republican rival Fillon, as well as President Hollande, garnering support from establishment parties which come together against Le Pen.
- Marine Le Pen announced on Monday night that she was temporarily stepping down as head of the Front National party in a bid to widen her appeal ahead of next month’s presidential election run-off.
- A recent Ipsos poll is showing that Macron will defeat Le Pen 62-38 in the second round.
- Headline inflation in March rose 0.7% year-on-year, maintaining the pace from the prior month and matching expectations as well.
- Core CPI over the same period rose 1.2%, in line with consensus estimates as well.
- Spot gold declined 1.0% yesterday to its lowest in almost 2 weeks, and failed to recover back above $1,280/Oz earlier this morning. The yellow metal is currently trading 0.2% higher from yesterday’s close at $1,274/06/Oz.
- Gold is expected to be supported above its key 200-day moving average at $1,255/Oz for the time being; to the upside, the psychological resistance at $1,300/Oz remains.
- Silver for immediate delivery recovered by as much as 1.1% to $18.0085/Oz, but failed to hold above the $18/Oz handle and currently trading around its 50-day moving average of $17.9232/Oz.
- Crude oil futures expiring in June looks set to snap a 6-day losing streak, rising 0.7% to $49.55/bbl earlier today, ahead of US government data due tonight forecast to show crude stockpiles fell for a third week in a row.
- Russian Energy Minister Alexander Novak will meet with the nation’s oil companies this week to discuss the possible extension of supply cuts with OPEC past June.
- Spot 1.3937
- USDSGD yesterday closed below its 200-day moving average for the first time since October last year, signalling further bearish momentum for the pair.
- The pair recovered slightly earlier today, rising 0.1% to 1.3942.
- The 5-month low of 1.3909 acts as the next key support level. To the upside, the next resistance is at 1.4082.
- Spot 0.7558
- AUDUSD failed to extend upon its overnight gain, reversing 0.3% instead back towards its 200-day moving average of 0.7550.
- The pair has largely traded sideways, mostly within the range of 0.7500 and 0.7750 over the past 3 months. A breakout in either direction could bring AUDUSD to either 0.7200 to the downside, or 0.8000 to the upside.
- Spot 1.3552
- USDCAD jumped 1.0% to 1.3560, the pair’s highest level in 2017, after the US imposed tariffs on softwood lumber and threatened to do so on dairy products as well.
- A break above the important 1.3600 level, and the pair could rise further quickly to the next resistance of 1.4000, last traded in Feb 2016.
- Spot 6.8847
- The PBOC earlier weakened its reference rate by 0.23% to 6.8830 to the US dollar, from 6.8673 yesterday.
- USDCNH was little changed, as it continues to fluctuate around its 100-day moving average of 6.8833. Yuan volatility has been greatly subdued despite a recent slump in Chinese equities.
- Spot 110.08
- USDJPY erased an earlier decline to gain back above the 110 handle, after risk appetite got a further boost today.
- It remains to be seen if the pair can sustain its recovery, as uncertainty over Tump’s tax reform plans continue to keep a lid over US yields. However, expectations that the BoJ will continue to keep policy accommodative will continue to keep the yen weak.
- Spot 1.2778
- GBPUSD fell 0.4% to 1.2773, near a 1-week low. A break below it could drive the pair nearer to its 200-day moving average of 1.2610, which may be a level many sterling bulls are keeping a watch on.
- The momentum continues to remain to the upside though, with the 1.3000 psychological level providing some short-term resistance; over the longer-term, the key level to watch is 1.3500.