The US Indices drifted lower on Friday, as US bonds yields surge. Most of the tresaury yields are at multiyear highs, all bonds with maturity of less than 5 years have the highest yields since the collapse in 2008. The US stocks are still finding support from the earnings outlook.
The dollar index, DXY, rose to almost three weeks high approaching a resistance area that is being formed since late January. The US dollar was supported by the rising yields, which is promoting the tightening monetary policy held by the Federal Reserve. Moreover, the US economy is still showing strength while some rival’s economies showed signs of weakness in the first quarter of 2018. In terms of data, we await the preliminary release of the Manufacturing, Services, and composite purchasing manager index, along with Home sales.
The Euro dropped almost one percent against the US dollar on Friday, as dollar strengthened, and investors are afraid of a neutral tone by the ECB after the slowdown in some economic data in the Eurozone. The major event of this week, is the European Central Bank meeting that will take place on Thursday. No change in interest rate is expected. However, any hawkish comments by Mario Draghi in the press conference regarding tapering of the Bond buying program, should provide good support for the currency. As for today, Manufacturing, Services, and composite purchasing manager index from Germany and Eurozone as a whole are due.
The British pound continued on suffering and found support below $1.40. Last week, Wage growth, Inflation numbers, and retails sales came out lower than expected showing some signs of weakness. On Thursday, the Bank of England Governor, Mark Carney, was worried about these numbers and pointed out that there might not be a rate hike in May, by saying that there are other Monetary Policy meetings this year. All the mentioned factors, put the cable under pressure.
The Canadian dollar weakened to two weeks low against the US dollar as the deadline for a NAFTA deal is approaching. Moreover economic data on Friday showed slight drawbacks. Earlier last week, Bank of Canada Governor Poloz confirmed that NAFTA deal will be good for business, and that he prefers interest rates to stay below neutral for the time being.
Gold prices tumbled on Friday, as the US dollar gained strength from the rising treasury yields. Fears from Geopolitical unrest and trade war eased, allowing investors to dump the safe heaven.
Strong economic data by the United States, supported the expectations that the Federal Reserve might raise rates for three more times this year which will add pressure on Gold prices.
Oil dipped on Friday as President Donald Trump tweeted about OPEC and oil prices by saying that “Looks like OPEC is at it again. With record amount of Oil all over the place including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!” A report on Friday, by Baker Hughes showed that the U.S. Drillers added five rigs drilling for new production in the week ended April 20, raising the total to 820 which is the highest since 2015. The United States is increasing its oil production, and now it is the second highest producer in the world after Russia. Oil was being supported lately by the Geopolitical Unrest which might curb oil supplies, the expected Sanctions against Iran, and the decrease in Supply from Venezuela.
The most important economic events:
|7:30||EU||German Manufacturing PMI (Apr)||57.6||58.2|
|7:30||EU||German Services PMI (Apr)||53.9||53.9|
|8:00||EU||Manufacturing PMI (Apr)||56.6||56.6|
|8:00||EU||Markit Composite PMI (Apr)||54.9||55.2|
|8:00||EU||Services PMI (Apr)||54.8||54.9|
|12:30||CA||Wholesale Sales (MoM) (Feb)||0.3%||0.1%|
|13:45||US||Manufacturing PMI (Apr)||55.2||55.6|
|13:45||US||Markit Composite PMI||55.3||54.2|
|13:45||US||Services PMI (Apr)||54.3||54.0|
|14:00||US||Existing Home Sales (Mar)||5.55||5.54|
|14:00||EU||ECB's Coeure Speaks|
|19:30||CA||BoC Gov Poloz Speaks|
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