Morning brief for May 18

The US dollar was hurt and Treasury yields declined with allegations against Trump on the collusion between his election campaign and Russian entities. This came following the New York Times release of James Comey’s memo. It states that Trump pressured the former FBI Director to drop his investigation into Mike Flynn, former US security adviser, with Russian authorities in the mix. The news

The Trump reflation trade seems now totally unwound, and investors’ economic stimulus hopes are killed. USD/JPY saw a sharp dive overnight. The yen strengthened to 110.54 against the USD. In the Asian session, USD/JPY rebounded to 111.10 as there was little in the news from the US today apart from the appointment of a special counsel to the Russia investigation. We will be waiting for the test of 111.90 to restore the bullish outlook.

The euro spiked to a high above 1.1170 then retreated to 1.1140 as there was nothing in terms of euro specific news today. ECB President Draghi will be speaking tonight in the wake of the French Presidential election. We don’t expect it is a market driving event. Draghi will likely be cautious choosing not to speak of gradual tapering of QE and ECB’s monetary policy projections. There is also a streak of the US data on the agenda: jobless claims and the Philly Fed survey. Also, traders will have a chance to hear Fed president Mester speaking. And there is also a potential for some news from Washington. Treasury Secretary Mnuchin will be speaking and the investors will be all ears to hear his view on the economy, trade, US currency, Administration’s fiscal plans.

Aussie rose higher to 0.7470 as the USD retreated. Yesterday’s statement from Standard & Poor’s affirmed Australia’s AAA sovereign rating and maintaining the negative outlook. The driving force of today’s AUD upsurge was upbeat labor market report from Australia with declined unemployment rate and more jobs created.

Kiwi was a big winner yesterday. It rose to 0.6943 but edged down to 0.6930 in the Asian session.

USD/CAD is trading near 1.3620. The currency pair is going through the consolidation phase. A break of resistance at 1.3640 will allow us to bet for a further upsurge towards 1.3670.

In commodities, oil prices lost a few point in the Asian session after settling at a two-week high overnight. A talk about OPEC’s production cuts has partially propped up the fuel but prices remain under pressure from still plentiful supplies.

Anastasia Mileshkina