Once again the markets return from a weekend, where unsavoury headlines over terror attacks dominate. The UK again, this time London was the target, still mourning the events in Manchester, which were commemorated in a concert this weekend.
· Again, I feel compelled to detach any market reaction, and in this instance, there isn’t one, with attentions here focused on the general election this Thursday.
· The polls are somewhat erratic at present, and as such this has done little to alter the consensus view that Theresa May will retain a Tory government, and to that end, there is little change from Friday levels.
· Some were expecting a gap lower a gap lower in Cable at the very least, but remain poised for another test on 1.2900. EUR/GBP is also holding the mid 0.8700’s, and after a few attempts towards 0.8800, the resistance we have mentioned here in recent weeks is showing its hand.
· It is going to be a choppy road ahead however, but key limits to watch for in the leading pairs remain either side of 1.3000 on the upside (1.2930 initially), and 1.2770-50 for Cable, while the cross rate support comes in ahead of 0.8650 for now.
· UK services PMIs this morning, so we may get a test close to these levels in the data results warrant.
EU wide PMIs also due, but are perhaps less influential as a binary event, with the EUR having travelled some way on the upside. 1.12.80-1.1305 still caps for now.
· That said, we have little prospect of any major dip here, as the ECB meeting later this week will be scrutinised in the press conference as the market looks for QE tapering signals which are expected later this year.
Plenty of US data ahead, headlined by the ISM non-manufacturing PMIs later today. Just as important for us are the Q1 productivity stats, which continue to provide an area of concern for the Fed.
· This may well have implications for US wage growth ahead, though this is holding up (albeit at subdued levels) as reported in the jobs report on Friday. Factory orders also due.
· US Treasury yields are grinding lower at best, and in line with this, the USD/JPY rate lacks the momentum to take out the buying interest ahead of 110.00.
· As such, we look for 110.00-111.00 to hold for now, with some decent size expiries over the next few days in the area adding to a period of consolidation/congestion.
In the commodity currencies, AUD and CAD are both getting some near term relief, and the former a little more so given near term exhaustion.
· AUD/NZD was one to watch for us, and given the bearish sentiment over the Q1 GDP figures this week and RBA sentiment, traders are happy to sit it out on the side-lines rather than pressure further from current levels.
· This morning iron ore and copper both bounce giving AUD a boost. Copper rejected the 2.52 level quite hard to reach the 2.57 level.
For NZD, it is the inverse, with the spot rate topping out around 0.7150 or so. As above, sub 1.0400 was going to be a tough sell given the ground covered, and we have duly pushed back towards 1.0500 today.
· Tomorrow we also get the Dairy Auction which may inspire some volatility.
Oil prices have recovered to pull USD/CAD back into the mid 1.3400’s, but notable was the strong selling interest above 1.3550 last week, and this has been a key factor in the pullback (along with oil) this morning.
