News & Analysis

US stocks mixed – Apple earnings beat – Eyes turn to the FED; Oil –Gold drop; USD continues its charge; GBPUSD belated again!

May 2, 2018 | Market Updates

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Ôû© 18:30 GBP Construction PMI
Ôû© 22:15 USD ADP Non-Farm Employment Change
Ôû© 00:30 OIL Crude Oil Inventories
Ôû© 04:00 USD FOMC Statement – Federal Funds Rate EXP hold at 1.75%

US markets – finished mixed on Tuesday, earnings continued as the main driver. Apple reported after the close beating expectations. iPhone sales fell short but the company announced a generous $100 billion capital return program. Of the S&P 500 companies that have reported thus far, 80 percent have posted better-than-expected earnings, according to Thomson Reuters I/B/E/S. Merck, Pfizer, Aetna, and Archer Daniels Midland all reported stronger-than-forecast results before the bell Tuesday. Boeing and Pfizer held the Dow in the red as they both traded 3.4% lower.

The Dow Jones lost 64.10 points. The S&P500 rose by 6.75 points and the NASDAQ closed 64.44 points higher.

European markets – most major bourses closed for May Day. The FTSE traded 11.06 pts higher. Just Eat lead the charge closing 4% higher. BP added 1.8% after reporting profits surged 71 percent amid the rally in oil prices.

Oil – fell sharply overnight continuing the range. Price hitting 2-week lows. The dollar remained near a four-month high and traders digested the latest developments around the Iran nuclear deal. Israeli Prime Minister Benjamin Netanyahu stepped up pressure on the United States to pull out of the 2015 deal with Iran. OPEC oil output fell to a one-year low in April due to declining production in Venezuela and lower shipments from African producers, a Reuters survey showed. Looking to the daily chart price is locked into a range between 68.85 and 67.05. US inventories will be released tonight this may break the deadlock. The market is looking for a 1.0M stockpile figure.

Forex – the USD continues to rule the roost, risk pairs and the Yen closing lower. The AUDUSD was smashed again breaking below .75. The EURUSD lost 81 pips and returned back below 1.2000, new 5-month lows. Divergence between growth and the interest rate outlook versus other countries spurred investors to chase the currency higher. The USDJPY jumped above 109.85, its highest close since 2nd of February. The USDCAD started with a strong lead and did touch new weekly highs at 1.2913 before better than expected Canadian GDP knocked the USD back.

The GBP continued to be flogged as the USD and continuing poor data pulled the floor out from underneath buyers. The Latest was the Manufacturing PMI, it came in at 53.9 below 54.8 expected. The Cable 145 pips lower. Gold followed the crowd losing $11.40 and breaking back below 1307. The 2-year yield hit its highest level since 2008 in last night’s session.

Federal Reserve – Most investors are not expecting the central bank to tighten its policy. Expectations in the market for a rate hike are just 5.7 percent, according to the CME Group’s FedWatch tool. However, investors will be on the lookout for clues about the central bank’s views on inflation and the economy.

“A key focus for us this week will be the extent to which the Fed statement on Wednesday jawbones markets to force pricing for hikes in 2018 higher,” Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, said in a note.

“The current pace of repricing in fed funds is not immediately problematic for the Fed and there is yet time to price more into the curve, though we’d argue that at the June meeting, it’s likely the markets will have to come to grips with the possibility of a fourth hike in 2018 and price more appropriately,” Lyngen said.

Risk carnage to the USD. The AUDUSD has lost 623 pips since January, 300 of it since April. The GBPUSD has lost 730 pips since April.

Good trading from Eightcap.

Sources; CNBC All times are AEST

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