Synopsis:

Bank of America's May Global Fund Manager Survey reveals a surge in bullish sentiment, the highest since November 2021, driven by expectations of imminent rate cuts and resilient economic outlooks. However, vulnerabilities remain due to potential stagflationary pressures.

Key Points:

• Economic Optimism: Majority of fund managers anticipate rate cuts in the second half of the year, with a prevailing belief in avoiding a recession. Cash levels have dropped to a three-year low at 4.0%, and stock allocations are at their highest since January 2022.
• Macro and Policy Expectations: There is a notable shift in expectations with a decrease in global GDP and earnings predictions since September 2023, amidst growing pessimism about the US economy. Yet, 78% dismiss the likelihood of a recession, favoring a "soft landing" scenario.
• Crowded Trades and Risks: The survey identifies "long Magnificent 7" as the most crowded trade, followed by "long US dollar" and "short China equities." The primary concern for investors is higher inflation, seen as the top tail risk, followed by geopolitical tensions and economic downturn risks.

Conclusion:

While the current sentiment among global fund managers is markedly bullish, reflecting strong expectations for policy easing, there remains a cautious outlook towards potential economic challenges. The anticipation of lower bond yields and multiple Fed rate cuts within the next year underscores a complex investment landscape where inflation and government policy responses will play critical roles.

• Sterling set for a fourth straight day of gains

• A new rally high at 1.2671 but gains prove fleeting

• Pullback to the 1.2740s looks corrective

• A climb above 1.2700 on the cards while above 1.2585 session low

• Close above previous significant high, 1.2634, to strengthen the bull run

• Upside target provided by Apr. 9-10 1.2709 double day high

  For more click on FXBUZ

Synopsis:

MUFG analyzes the recent U.S. decision to implement tariffs on Chinese imports, including electric vehicles (EVs), steel, and aluminum, examining the implications for U.S.-China relations and the potential effects on the USD.

Key Points:

• Tariff Implementation: The U.S. government has initiated tariffs on select Chinese imports, aiming to preempt a potential surge in EV imports from China. This move is stated to be precautionary rather than political.
• China's Reaction: China has criticized the new tariffs, urging the U.S. to rescind them and threatening to take strong measures to protect its interests.
• Political Responses: Former President Trump criticized the measures as insufficient, hinting that more aggressive trade policies could be expected if he were re-elected.
• Economic and Policy Implications: The tariffs are part of a broader strategy by the Biden administration to manage inflationary pressures ahead of the presidential election.

Conclusion:

The introduction of new tariffs on Chinese goods marks a significant development in U.S. trade policy, potentially influencing U.S.-China economic relations and impacting global trade dynamics. For the USD, the immediate effect might be bullish, especially if trade tensions escalate. However, the longer-term impact on the USD will depend on the broader economic context, including domestic policies and the actions of the Federal Reserve. As the presidential election approaches, the political landscape could further shape these dynamics, with potential policy shifts depending on the election outcome.

Synopsis:

CIBC provides a comprehensive analysis of the latest US CPI and retail sales data for April, indicating a shift towards more moderate inflation and consumer spending patterns, which could influence Federal Reserve policy decisions.

Key Points:

• Inflation Trends: April's Core CPI increased by 0.3% month-on-month, aligning with consensus expectations and showing a slight decrease from previous months. Headline inflation also matched projections at 0.3%, indicating a stabilization in price pressures.
• Services and Goods Prices: Services inflation slightly cooled, especially in transportation, while core goods prices saw a minor decline of 0.1%.
• Retail Sales Data: Retail sales were unexpectedly flat in April, with a notable contraction in the control group that feeds into GDP calculations. This suggests a cautious start to Q2 consumer spending.
• Economic Outlook: Despite the slowdown in April, the residual strength from Q1 and ongoing services demand are expected to maintain a steady economic growth rate.

Conclusion:

Today’s CPI and retail sales data should provide some comfort to the Federal Reserve, showing signs of easing inflationary pressures and a tempering of consumer spending. This could support the Fed's current cautious approach to monetary policy as it seeks additional data to confirm these trends.

• AUD/USD dipped down to 0.66215, buyers emerged, rally ensued, 0.6651 hit

• Pair probed 0.6650/70 zone where some daily highs, March monthly high sit

• Softer US yields US2YT=RR, US10YT=RR, US$ helped drive the rally

• USD/CNH, equity ESv1 & commodity HGv1XAU= gains helped buoy AUD/USD

• Techs are bullish; RSIs rising, pair above many DMAs, consolidation persists

• Rally above 0.6650/70 may squeeze shorts, bring 0.6840/70 into focus

• US April CPI, retail sales & their impact on Fed policy are key risks today

• Remarks from Fed's Kashkari, Bowman also may impact risk Wednesday

• For more click on FXBUZ

• EUR/USD has edged higher as USD weakens and risk improves this week

• 1.08135-1.08345 EBS range so far Wednesday, faces tech hurdles

• Close above 100-dma 1.0823 and daily cloud top 1.0838 to help bulls

• Would open April 9 peak 1.0885. In-Line or CPI miss could be catalyst

• FX options have been covering risk of further s-term EUR/USD gains

• FX options flag extent of post CPI volatility FX risk potential

• Beware huge option strikes expiries between 1.0750 and 1.0900 post CPI

For more click on FXBUZ

• AUD/USD +0.3%, retests recent highs ahead of the pivotal U.S. CPI

• Resistance at 0.6650 remains a key barrier to further upside

• Softer U.S. CPI than f/c likely takes AUD back above 0.67

• Clear bias to sell USD as mixed PPI sees USD head lower nL1N3HH1CU

• Lower U.S. yields also act as a drag on USD, 10yr at monthly lows of 4.42%

• View of the Week–Dollar outlook contingent on U.S. CPI nL1N3HG1Q8

• Support: 200-HMA (0.6605) has defined the recovery in the pair

• Event risk ahead = U.S. CPI and retail sales

For more click on FXBUZ

• More FX option traders are buying EUR call strikes over recent sessions

• EUR calls/USD puts give holders the right to buy EUR/USD at expiry

• Strikes are mostly between 1.0800-1.0900 and expiries sub 2-week

• 2-week 1.0850 recently paid 5.8 implied volatility on huge 450-million euros

• 13 Day 1.0900 EUR calls also paid early Wednesday at similar vol level

• A weak U.S. CPI print on Wednesday could give EUR/USD a further boost higher

• FX options have significantly increased FX volatility risk premiums for CPI

• Many large FX option strike expiries reside nearby

For more click on FXBUZ

• EUR/USD looks set to break above the cloud, that spans 1.0829-38 the region

• If there is a close above the cloud top, that would likely lead to big gains

• 14-day momentum remains positive, highlighting EUR/USD's upside bias

• Note, however, FX traders have space to take the dollar higher nL1N3HF0F8

• EUR/USD Trader TGM2334. Previous update nL1N3HH0N3

• Cable climbs to 1.2600, as global equity gains lift risk-sensitive pound

• 1.2600 is highest level since May 3 (1.2634 was high that day, on NFP miss)

• US April CPI data due 1230 GMT; 0.4%, 3.4% YY f/c. Core f/c 0.3% MM, 3.6% YY

• Cooler than expected US CPI data might spur further GBP/USD gains

• 1.2568 (Monday's high) is now a support point. 1.2510 was Tuesday's low

• May 22 is deadline for BHP to raise its $43 bln offer for Ldn-listed Anglo

• Four-day bull run extends into a 1.2592 Tues close

• A further nudge higher to 1.2599 early Wed

• Hammer style candles highlight strong demand into the May 9 and 14 closes

• May 3 1.2634 bull target high now joined by the 100DMA at 1.2632

• Daily cloud base behind at 1.2661

• Falling daily cloud warns of building resistance

• Converged 200 and 10DMAs provide support at 1.2544

  For more click on FXBUZ

• AUD/USD moves higher in Asia after opening at 0.6625; range 0.66215-0.6651

• Takes slower than expected Australia Q1 wage growth in stride

• Boosted by risk rally and soft U.S. yields; focus turns to U.S. CPI Wed

• Supported as RBA rate expectations diverge from those of other c.banks

• Carry trade demand persists; AUD/JPY heads for 104.88, 10-year high in April

• Break of 0.6650 opens test of 0.6667-77, Mar high and 0.618% of Dec-Apr drop

• Support 0.6610-15, 0.6580-85

• For more click on FXBUZ

Synopsis: Danske Bank presents its forecast for the upcoming US Consumer Price Index (CPI) for April, highlighting potential nuances in the inflation data that could significantly influence market behavior and Federal Reserve policy expectations.

Key Points:

• April CPI Forecast: Danske expects a +0.4% month-on-month seasonally adjusted increase in headline CPI and a +0.3% increase in core CPI, aligning closely with market consensus.
• Impact of Core CPI Components: The report underscores the importance of details within the core CPI, particularly non-housing services inflation, which previously drove a notable market reaction similar to conditions seen in June 2022.
• Fed Policy Expectations: Based on the CPI outcome, Danske anticipates the Federal Reserve may proceed with two rate cuts this year, with prevailing risks suggesting a downward adjustment in short-term US rate pricing.

Conclusion: Danske Bank advises careful monitoring of the inflation data's details, particularly the non-housing services segment, which could trigger significant reactions in financial markets.

• AUD/USD +0.2% in Asia as USD stays on defensive on Powell inflation optimism

• Boosted by risk rally and lower U.S. yields; focus turns to U.S. CPI Wed

• Australia Q1 wage growth slows, soothes inflation worries, taken in stride

• Higher-for-longer RBA, carry trade demand, metals rally support

• AUD/JPY overcomes 103.73 resistance,76.4% of 104.88-100.01 Apr 29-May 1 fall

• Retest of 104.88, 10-year high likely; AUD/USD Wed range 0.6621-0.6641

• AUD resistance 0.6645-50, 0.6667-77, support 0.6600-05, 0.6580-85

• For more click on FXBUZ

• AUD/USD hovers near 0.6630 resistance, awaits AU Q1 wage price index

• A year-on-year rise of 4.2% and quarter-on-quarter rise of 0.9% expected

• Likely to have a bearing on inflation expectations and RBA policy

• Higher-for-longer RBA, risk rally, elevated metals prices underpin AUD

• AUD/JPY tests 103.73 resistance, 76.4% of 104.88-100.01 Apr 29-May 1 fall

• Break opens retest of 104.88, 10-year high as carry trade demand persists

• AUD resistance 0.6630, 0.6650, 0.6667-77, support 0.6600-05, 0.6580-85

• For more click on FXBUZ

• Trades 0ff 0.03% after closing up 0.27% with the USD off 0.2%

• Tuesday's mixed jobs report, but BoE's Pill - summer rate cut is possible

• BOEWATCH - 24.39 pt Aug cut from 23.54pt at Friday's close, little changed

• There is no major UK data so risk appetite and the USD to lead into US CPI

• Charts; A bullish outside day, 5, 10 & 21-day moving averages climb

• 21-day Bollinger bands expand, daily momentum studies rise - a positive bias

• Resistance starts at the 1.2617 upper 21-day Bolli then the 1.2634 May high

• A close below the 1.2446 May low would end the topside bias

For more click on FXBUZ

• Trades -0.05% early after closing up 0.25% with the USD off 0.2%

• Tighter yield spreads supported, 10yr bund +4bp 2.540%, 10yr UST -3bp 4.445%

• German investor morale at a 2yr high, but German 2024 growth forecast cut

• Today's U.S. CPI will be pivotal for US rate expectations and likely the USD

• Charts - momentum studies, 5, 10, and 21-day moving averages climb

• 21-day Bollinger bands rise - daily charts maintain the positive setup

• 1.0831 upper 21-day Bolli and 1.0834 0.618% of the Mar/Apr fall likely cap

• Friday's 1.0760 low, then the 1.0724 double-bottom are initial supports

• 1.0795/00 1.241 BLN and 1.0820/25 1.657 BLN close major strikes for May 15th

  For more click on FXBUZ

• AUD/USD opens 0.3% higher as Powell plays down rise in U.S. PPI

• Boosted by risk rally, lower U.S. yields on upbeat comments from Fed chair

• Powell bullish on U.S. economy, confident inflation will decline

• Hopes for 'soft landing' at stake as investors await key U.S. CPI Wednesday

• Metals rally supports AUD; CME copper hits record peak on fund buying

• Carry trade demand underpins AUD; AUD/JPY +0.4% Tue, nears 103.73 resistance

• Australia budget doles out energy, rent relief in bid to tame inflation

• Australia wage growth data and PBOC one-year MLF rate setting awaited Wed

• Tue range 0.6578-0.6627, support 0.6605,0.6580-85, resistance 0.6630, 0.6650

• For more click on FXBUZ

Synopsis:

Credit Agricole provides its EUR/USD forecast for the next two years, outlining expectations for a decline in 2024 due to prevailing policy divergence and market dynamics around the US presidential elections. The bank also anticipates a rebound in 2025 based on projected changes in the US economic environment.

Key Points:

• Q4 2024 Forecast: Credit Agricole anticipates EUR/USD to reach 1.05 by the end of 2024, influenced by sustained policy divergence between the Federal Reserve and other G10 central banks, alongside heightened market caution due to the US presidential elections.
• Q4 2025 Projection: The bank expects EUR/USD to recover to 1.12 by the end of 2025. This forecast is based on a more aggressive cycle of Fed easing driven by a deteriorating growth outlook and slowing inflation in the US.
• Upside Risks: The main risks to this outlook skew towards a stronger USD. These include more resilient US economic fundamentals potentially spurred by ongoing fiscal stimulus, persistently high US inflation possibly driven by new tariffs, a weak dollar policy, or migration restrictions, and a less dovish or more independent Federal Reserve.

Conclusion:

While Credit Agricole anticipates a near-term decline in EUR/USD due to US-centric factors and monetary policy discrepancies, the bank expects a reversal in the dollar's fortunes as the economic conditions in the US prompt a more pronounced easing cycle by the Fed in 2025. However, the noted risks could disrupt this trajectory, potentially maintaining a stronger USD than forecasted.

• NY opened near 0.6615, pair fell sharply after US April PPI report

• Above estimate headline result fueled concerns inflation is hot again

• US yields US2YT=RR, US$ rallied sharply, AUD/USD traded 0.6578

• Buyers emerged however as yields, US$ softened & risk assets rallied

• Significant downward revision to March PPI helped buoy risk

• Stocks, gold XAU= rallied while USD/CNH fell to 7.2355

• AUD/USD climbed back above the 10-DMA, turned positive, traded 0.66275

• Pair traded up +0.17% late in the day and technicals leaned bullish

• RSIs rising, pair above slew of daily MAs, consolidation phase persists

• US April CPI, retail sales reports are major risks for Wednesday

• Below estimate results could send US$ lower and AUD/USD much higher

• For more click on FXBUZ

• GBP$ ending NorAm by day's high, +0.2% at 1.2583; Tues range 1.2593-1.2510

• Pair initially fell post-PPI as HL data appeared strong; Mar revised lower

• Aiming higher, sterling still has key inflation tests ahead nL1N3HH1TV

• Fed's Powell uncertain on inflation path; next move unlikely a Fed hike

• U.S. CPI f/c a tad lower, w/o progress on lower inflation USD to remain bid

• Res 1.2593 Tues High, 1.2596 50% of 1.2894-1.2299, 100-DMA/May 3 high 1.2634

• Supt at 200-DMA 1.2541, 1.2510 Tuesday low, 1.2446 May 9 low

• Beyond Wed US CPI, May 22 UK CPI may hold clues to BoE policy path

• NY opened near 1.0795, hit 1.0767 on EBS after US April PPI hit the wires

• Headline number drove the spike lower but investors then looked at revisions

• Significant downward revisions erased gains for yields US2YT=RR, US$

• USD/CNH fell to 7.2355 & gold <xau+> rallied as risk sentiment improved</xau+>

• EUR/USD erased the post-data drop, turned positive, hit 1.08255 on EBS

• Remarks from Fed Chair Powell did nothing to deter EUR/USD bulls

• Rally stalled near daily cloud base, pair near 76.4% Fib 1.0885-1.0602 late

• Rising daily, monthly RSIs, move above 55- & 200-DMAs are bull signals

• April CPI & retail sales due Wed., downbeat data may sink US yields, US$

• For more click on FXBUZ

Synopsis:

RBC maintains a stable outlook on EUR/USD, predicting strong buying interest at lower price levels. The bank anticipates that corporate and long-term investor hedging at the 1.06 level will provide substantial support, limiting downside potential for the euro.

Key Points:

• Corporate Buying Demand: European corporates and long-term investors are likely to continue showing strong buying interest in EUR/USD whenever it reaches the 1.06 level, providing a floor to further declines.
• Central Bank Actions: RBC forecasts the European Central Bank (ECB) to implement additional rate cuts in June, September, and December, mirroring expected Fed cuts, thereby influencing yield differentials but already priced into forward curves.
• Comparative Currency Impact: The expected changes in the yield gap are seen to have a more pronounced impact on currencies like the CAD, which is expected to see a widening negative yield differential with the US.
• Technical and Fundamental Outlook: RBC views any rallies towards the resistance levels of 1.0848 and 1.0977 as potential buying opportunities, with technical support positioned at 1.0681 and 1.0601.

Conclusion:

While RBC has slightly adjusted its H2 forecasts for EUR/USD downwards, the overall strategy suggests a bullish stance on any rallies to key resistance levels.

• $CAD a tad soft in NorAm, -0.12% at 1.3649; Tuesday Range 1.3691-34

• Pair drips lower after US PPI revisions hint at slowing inflation

• Canada wholesale trade downside miss tempers CAD gains

• US CPI Wednesday the main event; Rtrs consensus f/c core 3.6% vs 3.8% pvs

• Should CPI show upside surprise Fed steady, higher hike tones will lift USD

• Supt 1.3633 50% of 1.3420-1.3847, 1.3609 lwr 21d Bolli, 1.3566 the 200DMA

• Res 1.3691 Tuesday high, 1.3707 the 21-DMA, 1.3782/85 the May1/Apr 30 high area