Synopsis: I

NG observes a fluctuating sell-off in the British Pound, influenced by recent economic data and upcoming reports. Despite a positive surprise in the UK's first quarter GDP for 2024, ING remains skeptical about its long-term impact on the Bank of England’s policy direction.

Key Points:

• Recent GBP Dynamics: The unexpected strength in Q1 2024 GDP provided temporary support to GBP, but ING doubts this will significantly alter the Bank of England's policy outlook, which remains oriented towards easing.
• Upcoming Data: Attention now turns to the March jobs data, though the Bank of England has reduced the emphasis on this in favor of inflation metrics, particularly the April services CPI due on May 22, which is seen as crucial for determining the timing of potential rate cuts.
• BoE Commentary: Market participants are also keen to hear any new insights from BoE Chief Economist Huw Pill regarding the timing of the anticipated easing cycle.

Conclusion:

While the recent GDP figure offered some respite, the overarching sentiment towards GBP remains bearish, with expectations for continued weakness over the coming quarters. The focus remains heavily on inflation data, which will be pivotal in shaping the Bank of England's upcoming monetary policy decisions. EUR/GBP is expected to find support in the 0.8550 to 0.8575 range amid these developments.

Repeats for wider audience, adds topic codes

• AUD/USD down 0.1% in Asia but holds within 0.6580-0.6630 range

• Weak JPY and caution ahead of latest U.S. inflation data weigh

• Traders also await Australian government's annual budget due later Tue

• Budget will prioritise efforts to fight stubbornly high inflation- Treasurer

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

• Markets pricing in around a 15% chance next RBA move in rates will be up

• Easing chances this year seen as negligible; cuts seen from Fed, ECB, BOE

• Higher metal prices provide underlying AUD support; Asia range 0.6612-0.6599

• Support 0.6585-90, 0.6560 resistance 0.6625-30, 0.6645-50, 0.6667-77

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• Steady early after closing up 0.2% as the USD fell 0.1% in a low-key session

• Yield spreads were unchanged with both 10yr bund and 10yr UST off just 2bp

• The 'Choose France' campaign attracted a record $16BLN in fresh investment

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

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

• The recent 1.0812 high and 1.0818 upper 21-day Bollinger likely cap in Asia

• Friday's 1.0760 low and then Thursday's 1.0724 base are initial supports

• 1.0750 1.518 BLN and 1.0800 1.549 BLN close major strikes for May 14th

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Repeats for wider audience

• AUD/USD consolidation in 0.6580-0.6630 range to continue as risk events loom

• RBA rate expectations diverge from those of other major c.banks, supports

• Higher-for-longer RBA rate stance will continue to limit AUD downside

• Copper climbs towards two-year peak, Dalian iron ore gains 2%, underpin AUD

• Australia budget, US PPI Tue; Powell participates in a moderated discussion

• Support 0.6585-90,0.6560 resistance 0.6630, 0.6650; Mon range 0.6586-0.6629

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• USD/JPY rose 0.28% having cleared 156.05, 50% of its 160.245-151.86 plunge

• So far modest breakout was catalyzed by NY Fed survey's higher inflation

• Tues's US PPI and Wed's CPI & retail sales are hard data tests for Fed, USD

• The last new y/y low in CPI was 3.0% in June 2023; April f/c at 3.4% vs 3.5%

• Fed still favored in futures to cut by Sep, 43bp by year-end

• BoJ swaps have a 10bp hike in July. 23bp by year-end: up after QE cut Monday

• JGB yields on slow, but steady rise this year as Fed cut pricing swings

• Close above 158.28 May 2 high would be bullish and eye 61.8% at 157.04

• The May 1 high by 158 is the next pivot point if US data are supportive

• MoF directed intervention possible in a rapid rise toward 2024/1990 peaks

• If US data prove dovish, props are at 155.50 and by 150

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Synopsis:

Credit Agricole provides an analysis of the EUR/CHF exchange rate, predicting a steady  0.97 to 1.00 range through the end of the year influenced by both domestic and international factors.

Key Points:

• Current Stability: EUR/CHF has stabilized around 0.9750, influenced partly by a surprising rise in Swiss CPI in April and a relatively calm domestic news flow.
• Limited Domestic Impact: Upcoming events in Switzerland, including remarks from SNB President Thomas Jordan and expected producer price index data, are not anticipated to significantly influence the CHF.
• Global Influences: The Swiss Franc is expected to be more responsive to international events, particularly the impact of the US CPI data on global equity and interest rate movements.

Conclusion:

While domestic factors provide limited impetus for significant movements in the CHF, international dynamics, especially from the US, could impact the currency pair. Credit Agricole reaffirms its forecast for EUR/CHF to remain within a 0.97 to 1.00 range in the coming months, suggesting a continued period of relative stability barring major global economic shifts.

• GBP$ firm into NY close, +0.28% at 1.2558; NorAm range 1.2569-33

• Pair anchored by 200-DMA at 1.2542, capped Monday by May 7 high 1.2569

• UST yields trickle lower, GBP shorts lightening as dovish Fed tones rise

• Wednesday's U.S. CPI, May 22's UK CPI key events as policy paths evolve

• Beware misleading moves as sterling eschews extremes nL1N3HG178

• GBP$ res at 1.2569, 55-DMA at 1.2603, May 3 trend high at 1.2634

• Close above 1.2596, 50% Fib of 1.2894-1.2299 shifts momentum to bulls

• Support at Monday low 1.2518, Daily base line 1.2504, May 9 low 1.2446

• NY opened near 1.0785 after 1.0766 traded EBS overnight, rally extended

• USD/CNH drop from its session high, equity ESv1 gains helped buoy

• Tighter DE-US spreads US2DE2=RR, lower US yields US2YT=RR aided the lift

• EUR/USD rallied to a 6-session high of 1.0807, sellers then emerged

• NY Fed report for April indicated Americans expect higher inflation

• EUR/USD slid near the 55- & 200-DMA, top of trend line off the March 8 high

• Pair dipped below 1.0790, sat near 1.0795 late, was up only +0.19%

• Techs lean bullish; RSIs are rising & pair traded above the 10- & 21-DMAs

• US April PPI, remarks from Fed's Powell, Cook may impact risk Tuesday

• US CPI, retail sales for April are bigger risks looming for Wednesday

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• NY opened near 0.6610 after 0.6586 traded overnight, rally extended early

• Pair hit 0.6629 with help from commodity HGv1DCIOc2, equity ESv1 gains

• Risk softened after NY Fed report showed Americans expect higher inflation

• US yields US2YT=RR firmed, equities fell & USD/CNH rallied toward 7.2400

• AUD/USD briefly turned lower, hit 0.6602 then sat near flat late in the day

• Daily doji formed, implies indecision; monthly techs remain bullish though

• US April PPI, remarks from Fed's Powell, Cook may impact risk Tuesday

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Synopsis:

Danske Bank provides insights on the near-term trajectory of EUR/USD, expecting the currency pair to range-trade with a potential upside tilt influenced by market dynamics and upcoming economic data releases.

Key Points:

• Current Trading Range: EUR/USD is navigating between 1.07 and 1.08, with FX volatility at lower levels contributing to a resurgence in carry trades.
• Market Expectations: The market has stabilized its expectations for Federal Reserve rate cuts in 2024 at around 45 basis points, following recent Fed communications and labor market data.
• Influence of Upcoming Data: This week’s US CPI data is pivotal, with the consensus predicting a slight decrease in core inflation. The outcome could impact US yields and Fed rate cut timing, potentially tilting earlier than the currently anticipated September.

Conclusion:

Danske Bank suggests that while EUR/USD is likely to maintain its current range, there exists an upside risk due to the potential for lower-than-expected US inflation and overstretched USD positioning.

GBP/USD rose 0.3% on Monday, but the gains may be misleading given its tendency to retreat from market extremes in either direction recently, while traders are also unlikely to commit to a move before key U.S. and UK inflation reports this week and next.

Cable has yet to break significantly away from its 200-DMA and it remains near the 50% Fib of its recent trend high and low near 1.2540.

Traders will focus on the upcoming U.S. CPI data on Wednesday and the comparable UK report on May 22 to refine relative monetary policy expectations, which remain the key market driver.

Relatively high Fed and BoE policy rates due to elevated inflation in both the U.S. and UK have kept both the dollar and sterling strong versus other majors this year.

Since Fed officials recently tamped down tail risk of a U.S. hike and the BoE shifted to a more dovish rate vote, the upcoming inflation data may be seminal events in near-term rate evolution.

A resumption of the late-2023 inflation slide would increase market betting on a July Fed rate cut, potentially providing a lift for GBP/USD toward its recent flash high at 1.2634.
Similarly, a slide in UK inflation would cap sterling's rise by early April highs at 1.2709.

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Synopsis:

Morgan Stanley discusses the highly anticipated US CPI release scheduled for Wednesday at 8:30 am New York time, emphasizing its critical role in shaping Federal Reserve rate cut expectations amidst evolving inflation trends.

Key Points:

• Market Focus: Global markets are keyed in on the upcoming CPI data, which will play a crucial role in determining the timing of the Fed's rate cuts, previously adjusted from an aggressive seven cuts to a more cautious two, with the first expected no earlier than September.
• Inflation Trends: Morgan Stanley predicts a 0.29% month-over-month increase in core CPI, with expectations for gradual declines in rent inflation and a slight decrease in core goods prices. There is also an anticipated mild correction of previously high services inflation.
• Impact of CPI Data: While the April CPI data is crucial, Morgan Stanley believes it won’t dramatically alter the expected disinflationary trend for the year. Any deviations from their forecast could shift market expectations for the timing of Fed rate cuts, either earlier or later.

Conclusion:

Morgan Stanley maintains a confident outlook that inflation will continue to decrease throughout the year, leading to eventual rate cuts by the Fed. The firm underscores that the key indicators mostly point towards continued disinflation, suggesting that significant changes to the overall monetary policy path for the year are unlikely, regardless of the upcoming CPI outcomes.

EUR/USD struck a six-session high Monday and bulls may be looking to U.S. data as the catalyst that fuels a run towards 1.1050/1.1100.

U.S.
Treasury yields US2YT=RR, US10YT=RR trading near recent lows helped EUR/USD's consolidation phase of gains off the May 1 daily low persist.

German-U.S.
2-year spreads US2DE2=RR, which EUR/USD is correlated with, are helping support EUR/USD during this period of consolidation as they remain near recent tights and are close to breaking resistance in the -187/-185bps zone.

Investors are now focused on U.S. April PPI, CPI and retail sales to see if EUR/USD's rally extends and spreads reach new tights.

Headline producer price inflation is forecast to have increased from March, according to a Reuters Poll, which projects core CPI growth will come in below March.

Retail sales growth is estimated to have slowed sharply from the prior month.

Downside surprises to those data would lead investors to increase bets on the Fed delivering more than the 50bps of cuts for 2024 foreseen in the latest Reuters Poll.

U.S.
yields could then resume their recent down trend, potentially tightening spreads beyond -187/-185bps and, thus, allowing EUR/USD to rally above the 76.4% Fibo of 1.0885-1.0602 and daily cloud.
Breaks of those impediments would bring the April and March monthly highs into focus followed by the 1.1050/1.1100 resistance zone.

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Synopsis:

Société Générale provides a detailed preview of the expected US Consumer Price Index (CPI) data for April, highlighting its significance in the current economic context and discussing potential impacts on major currency pairs such as the USD Index and EUR/USD.

Key Points:

• Data Overview: The April CPI report is anticipated to show a 0.4% increase in the headline and a 0.3% rise in the core components. These figures follow a series of 'soft' 0.4% monthly gains influenced by varying factors across the first quarter of the year.
• Components to Watch: The prediction of a 0.3% core increase assumes continued growth at trend rates for rents, insurance, and clothing, without the surges seen in previous months. Gasoline prices are expected to boost the headline number.
• Market Movements: While the upcoming CPI data is critical, SocGen does not forecast a breakout in the USD Index or EUR/USD based on their CPI projections. However, the firm notes that any potential breakout is increasingly likely to be upward if it occurs.

Conclusion:

SocGen underscores the importance of the upcoming CPI data in shaping market expectations and movements. While the firm does not foresee a dramatic shift in major currency indices based on this data alone, it acknowledges the growing potential for upward movements, contingent upon the data deviating significantly from expectations.

Synopsis:

Goldman Sachs provides insights on the upcoming US CPI report for April, suggesting potential relief in inflation data and discussing the implications for USD and broader market dynamics.

Key Points:

• US CPI Expectations: Goldman Sachs anticipates that the April CPI could show signs of relief, aligning with expectations for a moderation in inflation rates.
• US Data and Monetary Policy: Recent US economic data have shown some softening, particularly relative to high expectations. This development is crucial as it aligns with Fed Chair Powell’s criteria for potential rate cuts, which include not only inflation metrics but also labor market conditions.
• Impact on Currency Markets: The perceived balance in risks due to the recent US data softening could limit the strength of the divergence trade, especially in policy-sensitive currency pairs like EUR/USD.
• Strategy for Risk and Currency Markets: The environment is expected to remain favorable for risk assets and carry trades, especially if inflation shows the anticipated relief. Goldman Sachs recommends funding these positions from low-yield currencies like EUR and JPY rather than the USD.

Conclusion:

This week's US CPI report is pivotal and could confirm a shift towards easing inflation pressures. While the data may provide a supportive backdrop for risk assets and carry trades, the broader implications for the USD are seen as balanced. Goldman Sachs advises caution in using the USD to fund risk positions, suggesting alternative currencies with lower yields for better risk management.

• AUD/USD fell to 0.6586 overnight, neared the 10-DMA but buyers emerged

• NY opened near 0.6610 (+0.11%) after 0.6612 traded in Europe's morning

• US yield US2YT=RR drop helped weigh on US$ & prop up AUD/USD

• AUD/USD rally aided by commodity DCIOc2, HGv1 & equity ESv1 gains

• Pair gained despite USD/CNH rally above 200-DMA, hitting a 7-sesison high

• AUD/USD techs lean bullish; RSIs are rising, daily bull hammer candle formed

• Consolidation phase of gains off May 1 low reinforce the bullish signals

• 0.6650/70 is resistance, March monthly high, May 3 daily sit in that zone

• Remarks from Fed's Mester, Jefferson may impact risk in NY's morning

• US April PPI, CPI & retail sales will be key data risks this week

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• FX traders have space to take dollar higher nL1N3HF0F8

• But USD/JPY hovering below a key Fibo, bulls need a break above nL1N3HG0DL

• 156.05 Fibo, 50% of the 160.24 to 151.86 2024 (EBS) drop weighs

• Spot has seen a 155.50-96 range on Monday, EBS data shows

• BOJ cuts JGB purchase amount in hawkish signal to market nL1N3HG01D

• Huge differential between Fed and BOJ continues to underpin spot

• Euro usually makes gains against the yen in May nL1N3HA131

The Bank of England's June interest rate decision could be one of the most dramatic for sterling in years, thanks to a fascinating sub-plot involving BoE Governor Andrew Bailey and Chief Economist Huw Pill.

Despite saying that a June rate reduction was not guaranteed, Bailey sounded like he was itching to cut rates when he spoke at the press conference following the BoE's sixth consecutive rate hold last Thursday.

By contrast, chief economist Pill appeared much less keen when he spoke on Friday, saying that betting too heavily on a June cut would be "ill advised".

The seeds of the apparent friction between the pair may have been sown last November, when Bailey pushed back against discussion of cutting rates two days after Pill said market pricing of a cut in August 2024 did not seem totally unreasonable to him.

If Bailey joins Dave Ramsden and Swati Dhingra in voting for a June rate cut while Pill votes against, he would need outgoing Deputy Governor Ben Broadbent and Deputy Governor for financial stability Sarah Breeden to join him to avoid being the first governor outvoted on rates since Mervyn King in June, 2007.

Related comments: nL1N3HD0JYnL1N3H60CV

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• A marginally falling 200DMA, lacking significance, just capping GBP/USD

• The average currently sat at 1.2542

• Long lower candle shadows, Wed/Thurs, giving bulls slight advantage

• Initial key support Thursday's 1.2487 low

• A 61.8% Fibonacci retrace level below at 1.2430

• Fourteen day positive momentum is fading and RSI flat lining

• On balance a risk of a sideways bias this week

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• Cable has traded a 17 pip range thus far Monday; 1.2518-1.2535

• 1.2541 was Friday's high, after UK GDP data beat boosted the pound

• 1.2503 was Friday's low, after USD rose on higher US inflation expectations

• UK pay and jobs data due Tuesday at 0600 GMT; regular pay growth f/c at 5.9%

• US April inflation data due on Wednesday; core CPI forecast up 0.3% MM

• CFTC data showed net GBP short fell to 21,813 contracts in week ended May 7

• Bulls need a break above the cloud, that spans 1.0827-38 the region

• Spot had failed under the 1.0611 Fibo, in April, a bear trap: bullish

• 1.0611 Fibo is a 76.4% retrace of the 1.0448-1.1139 (Oct-Dec) EBS rise

• Bear trap set when a market breaks below a tech level but reverses

• 14-day momentum remains positive, highlighting the overall upside bias

• EUR/USD Trader TGM2334. Previous update nL1N3HD0HV

• Steady in a tight and quiet 1.2514-1.2527 range for sterling in Asia

• There are no UK data or BoE events so risk appetite and the USD lead GBP

• UK employers plan 4% pay rises in the coming year, public sector 3%

• BoE expects UK inflation to ease to 2% in April - wages remain elevated

• Charts; neutral 5, 10 & 21-day moving averages plus 21-day Bollinger bands

• Daily momentum studies conflict - the signals show no significant bias

• Resistance starts at Tuesday's 1.2568 top then 1.2595 upper 21-day Bolli

• A close below 1.2427, 0.618% of the April/May rise would be a bearish signal

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• Steady in a tight 1.0766-1.0774 range on EBS in a slow start to the week

• E-minis flat, UST yields little changed, Nikkei -0.07%, and AsiaxJP +0.3%

• There is no tier-one EZ or US data, so further consolidation is likely

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

• 21-day Bollinger bands rise - daily charts show a positive setup

• 1.0808 upper 21-day Bollinger band and recent 1.0812 high first resistance

• Friday's 1.0760 low and then Thursday's 1.0724 base are initial supports

• 1.0750 3.531 BLN and 1.0755 1.367 BLN close major strikes for May 13th

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• AUD/USD -0.15% in Asia as U.S. consumer inflation expectations stay elevated

• Fed officials mull whether rates high enough as inflation expectations jump

• Australia government optimistic on inflation, cuts 2024/25 GDP forecast

• Traders cautious ahead of week's risk events; U.S. inflation, AU jobs eyed

• Australia budget Tue, wages data Wed key for AU inflation expectations

• Higher-for-longer RBA rate stance likely to limit AUD downside

• Support 0.6585-90,0.6560 resistance 0.6625-30, 0.6650

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