From Morgan Stanley
USD rally to continue… “Robust US data, aided by expansionary fiscal policy, contrast with growing concerns about further acceleration in the rest of the world. A plateauing in Eurozone growth was acknowledged by the ECB, while headwinds to Chinese growth prompted a surprise cut in the RRR. These conditions, coupled with risk sentiment staying supported, which may continue the steepening of the US yield curve, should keep the USD rallying. For the USD bear trend to fall back into place we need to see either the rest of the world looking stronger and more synchronized or the US slowing down.”
Overnight Euro broke below another minor support area and eyes now set on the important 1.2010 Area. A break of this level could accelerate the unwinding of the near record Longs in the Currency.UK GDP released over night Missed expectations. .1 vs f/c .3 on Q/Q, this fits right into the MS comment above that rest of world slowing down, GBP -1 %. In fact it has closed lower 7 of last 9 days dropping a whopping 6 big handles .Dollar index is +1.7% this week and approaching the 200 D MA of 91.992.The last few days the currency complex has been driven by position adjustment and not anything macro or Central bank related. Today the Economic calendar has first look at Q1 GDP and Q1 employment cost index the latter but might be more important than the former.
Gilts and Bunds have erased this week’s losses after 2-day rally, US 10s drifting higher as yields moving away from the 3% level and futures prices not far removed from this week’s highs. Stocks Mixed Spoos and Dow little changed to lower, NASDAQ a bit higher but Dax +.7%. .Amazon earnings yesterdays were just fantastic Stock +$100 8%.6 months ago with amazon performing as she is Nasdaq would +1% at a minimum instead of the .25%.This is another sign of the stock market having already priced in the much better than expected earnings. Crude oil Steady Bloomberg running a story discussing how cash oil traders are starting to shy away from doing business with Iran as concerns mount that Nuclear deal will be torn up. Base metals trading lower with aluminum -1.4 % and both Nickel and Copper -2%.Russia’s Rusal still in the news as the Oligarch who owns said he will not follow US wishes and Divest.
North Korean leader Kim Jung Un and South Korean leader Moon Jae embraced after signing a Historic deal to official end the conflict between the 2 countries. This also marked the first time a North Korean leader set foot on South Korean soil since the armistice was signed in 1953 (Via Bloomberg).A historic moment indeed
BOJ left policy unchanged as expected but tweaked language on when the bank expects the inflation to hit 2% target. BOJs Kiroda went out of way to say this is not a new policy shift. Yen thought it was as dripped aggressively when statement hit wires. Yen little changed now