Markets Today: Hold on

As far as the foreign exchange markets were concerned, the USD was a touch softer overnight after having made some gains in the Asia session yesterday.

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With the US having a long weekend for Memorial Day overnight and with the UK Spring Bank holiday, market liquidity was understandably thin, with limited interest in open FX, oil and gold markets that mostly marked time.

As far as the foreign exchange markets were concerned, the USD was a touch softer overnight after having made some gains in the Asia session yesterday in the warm after-glow of Fed Chair Yellen’s comments Friday that, providing everything goes to plan, a rate rise would be likely “in coming months”.

The FX moves overnight were very modest: in the case of the AUD/USD for example, the cross has since late yesterday been trading in a 10/20 point range in the high 71s, sitting this morning at around 0.7180/85.  The LME was closed.  Gold eased back (down $9.30/oz to $1207.40 (-0.76%), oil recovered after giving back some territory in the Asia session yesterday, WTI up $0.27/bbl to $49.60; Brent rose $0.44 to $49.76.  All quiet and measured ahead of Thursday’s OPEC meeting that seems likely to soldier on with the market share defence strategy, especially now with higher oil prices and US shale production falling back further.  The spot iron ore price gave back $0.88/t to $50.27, while Dalian iron ore futures rose 0.29% but Chinese steel rebar futures fell 0.35%.  On that front, we await tomorrow’s Chinese PMI releases and what the detail says about conditions in the steel industry in May.

There was very little data to speak of overnight.  The Eurozone monthly confidence surveys came and went without any market fanfare, the key Business Climate Indicator in May ticking back up to the highest level since January, but at 0.26 still a little shy of last year’s 0.29 average.  Germany’s preliminary May CPI reading showed the expected rebound, up 0.4% on the EU-harmonised measure after April’s 0.5% drop taking inflation to flat, up from -0.3%.  Eurozone inflation rates are out tonight.

Coming up

First up this morning is NZ building consents (8.45 AEST), weekly AU ANZ-Roy Morgan consumer confidence (10.30), ahead of the monthly Japanese labour market and household spending reports (both at 9.30) and the more market-sensitive industrial production (9.50).

Then the focus turns to the AU quarterly balance of payments (net exports) and government spending growth feeders into tomorrow’s GDP after broadly offsetting growth risks from yesterday’s positive (inventories) and negative (profits) data surprises.  For today’s release, NAB looks for a 0.8% growth contribution from net exports (market 0.7%) and flat government spending.  (There’s no consensus for government spending.) Also due today are the monthly building approvals and RBA credit reports for April neither of which is set to move the market too much, building approvals perhaps providing some more clues on whether the development pipeline is being pegged back or not.  RBA credit growth is forecast to grow by another 0.5%, supported by a likely rebound in business credit back to recent averages offsetting any mortgage credit softness.

Global markets are well and truly back on line again tonight with a couple of meaty US releases with the personal income, spending and PCE deflators report providing another update on Q2 growth and how consumer inflation is tracking against the Fed’s inflation target.  There’s also the Chicago PMI (ahead of the national ISM tomorrow night) and the Conference Board’s measure of Consumer Confidence that also contains consumers’ perceptions of the jobs market in the jobs plentiful/hard to get index that’s been pointing to a still improving labour market.

The OECD releases its latest half-yearly Economic Outlook publication tonight that will get some wire coverage.

Overnight

US and UK markets were closed for holidays. In commodities, Brent crude oil +0.89% to $49.76, gold-0.8% to $1,207, iron ore -1.7% to $50.27. AUD is at 0.7184and the range since yesterday 5pm Sydney time is 0.7165 to 0.7187.

Good luck.

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