There have been a number of big moves in North America and Europe today but perhaps the biggest story linking everything has been the big resurgence in the US Dollar. In recent weeks USD has been falling, but today, it turned upward again on a combination of two main factors.
1) US housing starts and building permits came in well above expectations. This provided new evidence to suggest a pickup in the US economy in April, which could mean that Fed interest rate liftoff may not be delayed too long. With more information possibly out tomorrow with FOMC minutes on the way, USD attracted significant new interest.
2) ECB Board member Coeure indicated that the ECB plans to ramp up QE purchases in May and June and then slowdown in the summer. Considering that the ECB has been running behind target since inception, this comes off as comical to me but it had a big impact on European trading sending EUR sharply lower and driving 2% gains for the Dax
, CAC and MIB.
The big surge in USD also had a significant impact across other markets. The prospect of a less dovish Fed again impacted trading in US stocks as the day progressed. Although the S&P 500 did hit an all-time high for a third day in a row, it struggled into the afternoon and dipped back under water at one point. Similarly, the Dow finally reached a new high but then slumped back ion the afternoon before bouncing in late trading to eke out a small gain and an all-time close but one with a question mark rather than an exclamation point.
Commodities and currencies also took a major hit from the USD rebound. To no surprise, EUR dropped significantly in the ECB news and it dragged continental currencies like CHF and SEK along with it. GBP also lost 1% on the day ahead of tomorrow’s Bank of England minutes where nothing much is expected since the meeting was trumped by the inflation report a couple of days later last week.
Crude oil both WTI and Brent fell 3% with the prospects of more OPEC production, particularly out of Iran adding to the supply war woes. Metals also declined with silver falling over 3% and gold falling 1.5%.
In currencies today, NZD, JPY, AUD and CAD fell the least against USD, outperforming their European counterparts. JPY could be active today on the Japanese GDP and leading index reports. Australia consumer confidence and positioning for Wednesday’s US and UK minutes could also be a factor in today’s trading.
Analog Devices $0.73 vs street $0.72
CSC $1.26 vs street $1.20, confirms plan to split into two separate public companies, to issue a $10.50 per share dividend on separation
Significant announcements released overnight include:
US housing starts 1,135K vs street 1,015K
US building permits 1,143K vs street 1,064K
UK consumer prices (0.1%) vs street 0.0
UK core CPI 0.8% vs street 1.0%
UK producer input prices (11.7%) vs street (11.5%)
UK producer output prices (1.7%) vs street (1.6%)
UK house prices 9.6% vs street 7.2%
Germany ZEW current 65.7 vs street 68.0
Germany ZEW expectations 41.9 vs street 49.0
Upcoming significant announcements include:
9:50 am AEST Japan GDP street 1.6%
10:30 am AEST Australia consumer confidence previous 96.2
3:00 pm AEST Japan leading index previous 105.5
7:00 am BST Germany producer prices street (1.4%)
9:00 am BST Norway GDP street 0.3% vs previous 0.9%
9:00 am BST Norway mainland GDP street 0.3% vs previous 0.5%
9:30 am BST Bank of England meeting minutes
10:30 am EDT US crude oil inventories street (1.75 mmbbls)
2:00 pm EDT US FOMC meeting minutes