British pound leaps on talks over BoE rate hike and Canadian dollar rebound
The pound is surging broadly today as BoE officials have indicated that the rate hike could come next year. British Prime Minister Boris Johnson also said there was nothing in the data to suggest a postponement of the reopening to June 21, although a little more time was needed to assess the situation. Nonetheless, the Canadian dollar is even stronger at the moment. In contrast, the Swiss franc and the yen are the worst performers, following the rise in yields on Treasury bills. The US 10-year yield is back above the 1.6 grip ahead of the US session.
Technically, the breakout of 154.80 from GBP / JPY confirms the uptrend resistance for long term resistance at 156.59 next. Eyes will also be on when GBP / USD breaks through key resistance at 1.4240 to resume its uptrend. Also, the breakout of 1.2817 resistance in GBP / CHF will complete a head and shoulder background pattern (ls: 1.2621, h: 1.2579, rs: 1.2645). This should confirm the completion of the correction from 1.3070 and bring a retest of this peak.
In Europe, at the time of writing, the FTSE is down -0.20%. DAX is down -0.17%. CAC is up 0.73%. Germany’s 10-year yield is up 0.0241 to -0.178. Earlier in Asia, Nikkei fell -0.33%. Hong Kong HSI fell -0.18%. China Shanghai SSE rose 0.43%. The Singapore Strait Times rose 0.60%. Japan’s 10-year JGB yield increased from 0.0006 to 0.076.
US durable goods orders fell -1.3% in April, first drop in a year
US durable goods orders fell -1.3% to $ 246.2 billion in April, worse than expectation of a 0.8% rise in mom’s pace. This is the first contraction for eleven consecutive months of growth. Excluding transport, new orders rose 1.0% mom, above expectations of 0.7% mom. The orders of the ex-defense remained practically unchanged. Transportation equipment fell from -6.7 million to 68.9 billion USD.
Initial jobless claims in the US fell to 404k, lowest since March 2020
Initial jobless claims in the United States fell from -38k to 406k in the week ending May 22, better than expected by 430k. It is also the lowest level since March 14, 2020 (at 256k). The four-week moving average of initial requests fell from -46k to 459k, the lowest since March 14, 2020 as well.
Continuing claims fell from -96k to 3642k in the week ending May 15. The four-week moving average of continuous claims fell from -2.75k to 3675k.
U.S. GDP grew 6.4% year on year in first quarter, unrevised
According to the second estimate, US GDP grew 6.4% annualized in the first quarter, unrevised. Upward revisions in consumer spending and non-residential fixed investment were offset by downward revisions in exports and private investment in inventories. Imports, which are a subtraction in the calculation of GDP, have been revised upwards.
BoE Vlieghe: We’ll probably have to wait until Q1 to see when a rate hike is appropriate
BoE politician Gertjan Vlieghe said in a word that, its central scenario for the economy sees “a little more slack” than the central projection of the MPC. He feared that “the transition out of holidays could lead to a slight increase in the unemployment rate”. But even then, “the first bank rate hike is unlikely to become appropriate until well into the next year, with a slight further tightening thereafter.”
On the upside, “the transition out of leave is easier” with unemployment at or slightly below current levels at the end of the year, and with associated signs of rising inflation and wage pressure beyond the temporary and basic effect. Second, “a somewhat earlier increase in the discount rate would be appropriate”.
Still, “it would probably take until the first quarter of next year to get a clear picture of unemployment and wage dynamics after holidays, so a hike in the bank rate might be appropriate shortly. afterwards, along a slightly steeper path than in my Cas center. “
Germany Gfk consumer sentiment fell to -7, increasingly leaving third wave behind
Germany Gfk consumer sentiment for June improved to -7.0, from -8.6, but missed the expectation of -5.3. Economic expectations jumped from 7.3 to 41.1 in May, reaching the highest level in more than three years. Income expectations fell from 9.3 to 19.5. The propensity to buy, however, fell from 17.3 to 10.0.
Rolf Bürkl, consumer expert at GfK comments on this: “We are increasingly leaving behind the third wave, the incidence values have fallen considerably for several weeks. And we are also making great strides in immunization. As a result, a relaxation of the restrictions and a revocation of the strict lockdown is possible. This primarily fuels economic optimism and creates a climate of economic optimism for the time being. “
Switzerland’s trade surplus narrowed to CHF 3.29 billion in April, below expectations of CHF 4.85 billion.
RBNZ Orr able to start normalizing monetary policy this time next year
RBNZ Governor Adrian Orr told a parliamentary committee meeting, “in our projections, subject to the economic outlook continuing to unfold as expected, around the same time next year, if not further, we see ourselves in a positive position to be able to begin to normalize. monetary conditions towards a somewhat neutral position. “
As for the NZD 100B large-scale asset purchase program, it will continue at the current pace until June 2022. Any changes in purchases will depend on the functioning of the market.
From Australia, private investment spending rose 6.3% in the first quarter, compared to an expectation of 2.2%.
GBP / USD Mid-Day Outlook
Daily Pivots: (S1) 1.4096; (P) 1.4136; (R1) 1.4160; After…
The GBP / USD intraday bias remains neutral and a further rise is expected with 1.4098 support intact. On the upside, the decisive breakout of 1.4240 will then resume a wider uptrend for the key resistance at 1.4376. On the downside, a firm break of 1.4098 support will suggest rejection through 1.4240 resistance. Consolidation from 1.4240 would then be the start of another lower leg. The intraday bias will be flipped lower for resistance at 1.4008 turned support first.
Overall, as long as the resistance at 1.3482 becomes support, the uptrend from 1.1409 should continue. A decisive breakout of resistance at 1.4376 will have larger bullish implications and aim for a 38.2% retracement from 2.11161 (2007 high) to 1.1409 (2020 low) at 1.5134. However, a firm break of 1.3482 support will support the 1.1409 upside is over and bring a deeper fall to 1.2675 support and below.
Update of economic indicators
|01:30||AUD||Private capital expenditure Q1||6.30%||2.20%||3.00%||4.20%|
|06:00||EUR||Germany Gfk Consumer Confidence (June)||-7||-5.3||-8.8||-8.6|
|06:00||CHF||Trade balance (CHF) April||3.29B||4.85B||5.82B|
|12:30 p.m.||USD||Initial unemployment claims (May 21)||406,000||430,000||444,000|
|12:30 p.m.||USD||Annualized GDP Q1 P||6.40%||6.50%||6.40%|
|12:30 p.m.||USD||GDP price index Q1 P||4.30%||4.10%||4.10%|
|12:30 p.m.||USD||Durable Goods Orders Apr||-1.30%||0.80%||1.00%|
|12:30 p.m.||USD||Durable goods orders excluding transport Apr||1.00%||0.70%||2.30%|
|2:00 p.m.||USD||Sales of houses pending M / M Apr||0.60%||1.90%|
|2:30 p.m.||USD||Natural gas storage||105B||71B|