Morning brief for May 16

Morning brief for May 16

The euro extended its gains to 1.0995 on Tuesday ahead of the release of the Eurozone GDP data. The softer than expected Empire State Manufacturing Index weighed on the greenback and offered the euro a solid support. With concerns about political risks in the euro zone having receded after the win of centrist Macron in French presidential elections, focus shifted towards the outlook for monetary policy. The ECB’s board might repeat its last meeting commentary. Amid improved economic fundamentals and dissipation of political risk after the French election, the ECB’s official might introduce some changes in their guidance by removing the words “or lower” from their pledge to keep unchanged or lower interest rates for the foreseeable future. The investors will be waiting to hear the timing of QE tapering. Today, their attention will be grasped by Germany’s Zew survey which is due at 12:00 pm (MT time)

The yen strengthened against the USD. USD/JPY was trading lower at 113.50 from yesterday’s high at 113.85. The current move can be viewed as a part of the consolidation phase. In the near-term future, the pair will likely trade sideways within the 112.50 – 114.20 range. The yen gained on the news about Donald Trump’s disclosure of highly classified information to the Russian foreign minister and ambassador Sergei Lavrov and about the recent cyber attack that has infected more than 300, 000 countries in 150 countries. When nothing is going on the trade is to buy the dollar against the yen. Any political disturbances increase demand for JPY.  Today, housing starts and industrial production are the main data releases to focus on.

Commodity currencies posted some gains due to surging oil prices. The latter ones rose following the release of a joint statement from the energy ministers of Saudi-Arabia and Russia concluding that the output cut agreement will likely be extended until the March 2018. Loonie is still flexing its muscles. USD/CAD slumped to 1.3610 from Monday’s high at 1.3720.

Aussie was trading sideways in the morning. AUD/USD dropped following the disappointing Australian consumer sentiment release. The release of RBA Meeting Minutes left Australian dollar almost intact. Towards the end of the Asian session, the pair managed to recover some of its earlier losses haven risen to 0.7420 from 0.7400. The current rebound has the room to expand higher towards the nearest resistances at 0.7440/0.7480.

GBP/USD is trading at 1.2900 a little bit higher from the preceding trading sessions.  The UK CPI release is the data highlight in Europe. The market is expecting the headline and core reading to rise in last month. The inflation print should be closer to 3% for us to see a substantial move in GBP tonight.

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