Europe Summary and Highlights 20 May
UK CPI softer, but PPI firmer and focus elsewhere on future developments
Oil trims, but part of a wider holding pattern as mkt navigates more verbal noise than signal on Iran for now
Tech risk eyes Nvidia the next focus
US20yr auction an d Fed Minutes of interest for USTs
European morning session
A nervy holding pattern at present as the market waits on the next strong direction, be it from more compelling news on Iran or fresh independent direction on the broader risk and/or yield side. Brent is -1.7% on the day following the more upbeat White House spin, though still well within the week’s range set on Monday. Given how comments keep swinging hot and cold, even at the same time, market commitment remains limited.
Risk markets holding in steady on the morning, paring dips, semiconductors managing another bounce while waiting for Nvidia. US yields a little off yesterday’s 16-month highs, with 20yr auction in focus later, along with Fed Minutes, and of course Iran developments.
FX markets largely quiet and also in recent consolidative areas – minor upside on the morning from USD/NOK and USD/CAD (+0.3%) as oil comes off a touch and dollar stays supported, but nothing notable.
UK CPI on the low side of expectations at 2.8% from 3.3%, albeit with PPI data on the firm side with output prices 4% from 3% (mkt 2.8%) and input prices 7.7%y/y from 5.3% (mkt 5.9%). Sums up the current state of play. Negligible 10 tick blip higher from EUR/GBP on the release but fleeting, cross on the low side of flat for the morning.
Asia Session
For the uncountable times, we are hearing Trump being optimistic of the Iran war to be ended very quickly. The market is choosing to ignore his words for now until there is something concrete. USD remain well supported as geopolitical tension persist. On the other hand, we are seeing far end JGB yields calm a bit. But it does not stop market participants to anticipate a potential change in bond purchase tapering from the BoJ in the coming meeting. If the BoJ is not intervening by special operation, they will at least try to put a lid on yields by slowing their pace of tapering for now. USD/JPY is trading 0.07% lower at 158.97.
It is reported that Trump was briefed on Iran strike options after pausing attack. The lack of progress has not only erased Trump's patience, but also market participants' anticipation of a swift resolve. Major equity indexes are in the red with previous metal also lower. The sour mood is driving AUD/USD 0.08% lower at 0.7101. NZD/USD is also 0.06% lower while USD/CAD rises 0.09%. Both Brent and WTI are slightly lower for the session. Else, EUR/USD is down 0.04% and GBBP/USD is unchanged.