According to reporting by Reuters, Trump’s administration has delayed new sanctions against Russia.

Key quotes:

Trump’s administration is “unlikely to approve them unless Moscow carries out a new cyber attack or some other provocation, a senior administration official said on Monday.”

“U.S. Ambassador to the United Nations Nikki Haley said on Sunday that Washington was preparing new sanctions on Russia over its support of Syrian President Bashar al-Assad.”

” “The ambassador got out ahead of things this time,” the senior administration official, who deals with the issue, told Reuters on condition of anonymity.”

“The official said Trump was concerned that immediately imposing more sanctions, on the heels of last weekend’s U.S.-led strike against Russian-backed Assad, would interfere with his efforts to negotiate agreements with Russian President Vladimir Putin on combating Islamic extremism, policing the internet and other issues.”

“On Monday, the administration accused Russian government-backed hackers of a global cyber attack on routers and other networking equipment.”

“Trump still believes he can negotiate with Putin, but that it is not likely to be productive if he is also criticizing him repeatedly, the first official said.”

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Analysts at ANZ noted that the kiwi held in a reasonably tight range overnight, as it awaits the next catalyst for direction.

Key Quotes:

“Today’s Chinese activity data will be watched, but ultimately it is the USD that will hold sway.”

“We are still of the mind that any further NZD strength should be faded.”

“Support 0.7180 Resistance 0.7440”

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Forex today was calmer on Monday in both the European and US sessions with markets less concerned over Syria and instead preferred to concentrate on macroeconomic and Central Bank outlooks. On Wall Street, the focus was on corporate earnings. 

There s some early concern in rhetoric from Russia when  Putin predicted global ‘chaos’ if West hits Syria again, but the consensus is that the stikes were indeed a targetted one-off strike and mission accomplished, so markets move on.

In the US session, US March retail sales printed better than expected although were offset by the miss in the Empire States Fed survey. The dollar was lower on the day as markets took profits out of the safe haven trades and concentrated on the inflation outlook where the curve is flatter and putting the reflation trade into question. 

DXY was trading between 89.389 – 89.850, -0.41% on the day for the close. The US 10yr treasury yield initially rose to 2.86% – a one-month high – but dropped in NY to 2.83%. The 2yr yields continued in their multi-year uptrend to 2.39% and to the highest since 2008. The Fed fund futures yields are pricing in the next rate hike in June around an 85% chance.

As for other currencies, the single currency climbed 0.4% to 1.2380 after entering the NY session at 1.2365 following the European morning’s spike. It was a bit of a chop in NY where the euro dropped to 1.2360 before reversing again and moving higher on dollar weakness to 1.2380 for the close. Markets will now look towards German ZEW with the US key retail sales out of the way. 

The pound was the best performer against the greenback and was up by +0.7% on the day to 1.4340, (cable was rising from1.4238 to 1.4313 during the European am. NY range 1.4339-1.4298). The markets are expecting the BoE to hike rates in May which is supporting the demand flows for the pound – BoE meets on May 10th and the probability of  25bp hike is at 74% currently. 

As for the cross, eyes will be on Brexit negotiations that have resumed this week which may temper gains in the pound while cable trades below the 1.4346 2018 high resistance level. However, central focus remains on Central Banks and ECB’s Praet was crossing the wires saying, “we must be patient, persistent & prudent w/our policy”.  EUR/GBP ended the NY session 0.8643 down 0-.18%, within a Monday range of between 0.8669-0.8627.

The yen was performing on the bid in NY, repeating the price action seen in overnight trade before catching a bid in London. The flows were dollar related but the yen was soft on the relief in markets over Syria angst. Eyes will turn to Abe’s and Trump’s meeting on Tuesday but the forex is mostly tracking stocks and risk in relation to the yen and its safe haven status. 107.39 was the early high with 107.03 the low. USD/JPY closed at 107.11.

As for the Aussie, it was range bound sideways until a little spike trough 0.7780 making for a small gain on the day. Eyes are on the RBA minutes, China March IO and retail sales for the Asia session.

Key notes: 

Wall Street stocks push higher and shrug-off Syria airstrike, focus on earnings, stellar Bank of America
Fundamental wrap: markets reverse risk-off Friday

Key events ahead: 

Analysts at Westpac noted the key events ahead from Asia today as follows:

“The minutes from the RBA Board’s April meeting are due at 11:30amSyd/9:30am Sing/HK. Markets price negligible risk of a cash rate increase until November but there will still be some interest in the commentary on e.g. the growth outlook.”

“China Q1 GDP is the regional data highlight (12pm Syd/10am local), though the market response is usually very muted, due to the lack of volatility in the headline y/y growth number. Indeed, the outcome has been either in line or only 0.1ppt from the Bloomberg median forecast every quarter since Q3 2015. Monthly industrial production, retail sales and fixed asset investment data will be released at the same time, with IP especially worth watching (it was 6.2%yr in Feb).”

 

 

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Mexico’s Economy Minister, Ildefonso Guajardo Villarreal, is hitting wires with comments about the NAFTA talks progress, as well as concerns about economic activity following tariffs.

Key highlights:

Has been speaking with Canada’s Freeland, plans to talk with the US trade rep Lighthizer tomorrow.

Planning a potential meeting of trade ministers in Washington on Thursday.

NAFTA negotiations are moving along nicely.

Have closed or are about to close ten sections, or chapters.

Approximately twelve chapters remaining.

Mexico is considering mirroring US steel and aluminum tariffs.

Tariff mirroring to prevent metal dumping in Mexico in response to US tariffs.

must prevent Mexico from becoming a ‘back door’ to other countries.

Unlikely that a big announcement on NAFTA will come from Thursday’s meeting in Washington.

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Aussie trading slightly higher as the USD recedes.
Markets are spinning up their bullish sentiment, but heavy data looms ahead for the week.

The AUD/USD is trading softly ahead of a busy Asia session, testing near 0.7780.

The Aussie opened the new week on a sustained note as markets recovered from last week’s Middle East tensions and drifted upwards slightly through Monday’s action after reaching a session low of 0.7750.

AUD/USD analysis: Chinese data to decide whether the pair can break higher or not

Tuesday greets the Aussie with a Meeting Minutes Release from the Reserve Bank of Australia (RBA) at 01:30 GMT, where traders will be hoping to glean some insight into where the RBA is sitting on the dove/hawk scale, as well as when or if the central bank will ever decide to take action in either direction as the Australian economy lags behind global averages. Following that in short order will be a data dump from China expected at 02:00 GMT, with February Retail Sales and Industrial Production, along with quarterly Gross Domestic Product figures. The year-on-year GDP for China’s first quarter is expected to print at 6.7 percent, a mild step lower from the previous reading of 6.8 percent.

AUD/USD Levels to consider

As FXStreet’s own Valeria Bednarik noted earlier, ” technically, the pair continues holding above a major Fibonacci support at 0.7740, the 61.8% retracement of the December/January rally, and as long as above it, chances are to the upside. In the 4 hours chart, the price settled above its moving averages, which lack directional strength, as well as technical indicators that hold above their mid-lines.”

Support levels: 07740 0.7700 0.7765

Resistance levels: 0.7785 0.7820 0.7850

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Blockbuster earnings for Bank of America on Monday and JP Morgan Chase on Friday.
The market is putting under the rug the geopolitical worries over Syria, Russia and China. 

The three main indices ended the day in positive territories as the market focuses on the earnings season and is somewhat re-assured that the strike on Syria is a one-time event and not the start of a prolonged war. 

The S&P 500 index gained 25 points or 1% to 2,682 and is just below its 50-period simple moving average. The index came back into positive territories for the year.The Dow Jones Industrial Average (DJIA) rose 243 points or 1% and reached 24,603 while the Nasdaq Composite Index climbed 59 points or 0.8% to 7,166 in Monday’s trading.

All the of the eleven main sectors of the S&P 500 were higher on the day and eight of them increased by at least 1%. The VIX (CBOE Volatility Index) which measures fear in the market dropped 5%, one of its worst daily decline since the start of April. 

Corporate earnings are currently the main market driver. Bank of America reported earlier on Monday with stellar earnings. Netflix and General Electric will be reporting their earnings in the coming days.

“America’s second-largest bank hauled in $6.9 billion in profit during the first three months of 2018. That’s the biggest quarterly profit in Bank of America’s history, taking out the previous record set in 2011. The blockbuster earnings are at least partly because of President Trump’s corporate tax cuts.”
according to CNN Money. 

Earlier on Friday, JPMorgan Chase (JPM), the biggest US bank, saw its earning leap 35%. The $8.7 billion in profits was the largest ever recorded by any US bank in history, according to S&P Global Market Intelligence.

On the geopolitical tensions, it turned out that US investors have largely shrugged-off the US strike on Syria. Last week the Syrian regime allegedly perpetrated an attack with chemical weapons which are forbidden by international laws. On Saturday, the US along with UK and France retaliated by firing over 100 missiles on three targets: a storage facility, a research center as well as an equipment facility and command post. Uncertainties now weigh over potential Russian sanctions. However, the stock market seems to have priced in that as well and is currently more inclined to focus on the earnings season. 

“Investors already know that earning will be good and at this point looking at guidance from companies. The next couple of weeks will be important because many companies from different sectors will report. Markets will remain volatile intraday on the days there is political news. Today we have Michael Cohen [Trump’s personal lawyer] appearing in court and would not be surprised to see some volatility because of that,” commented Quincy Krosby, chief market strategist at Prudential Financial.

Earlier in the day, the Retail Sales data increased 0.6% in March confirming economic expansion and improving conditions for the American household. 

Meanwhile, President Trump is set to nominate Richard Clarida as Fed Vice Chair. 

S&P500 Index daily chart

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From a fundamental basis, the markets have got on with it on Monday, shrugging off the Middle East risk and have prefered to focus on earnings on Wall Street that have got off to a good start for Q1 while markets assess the outlook for Central Banks, the reflation trade and the global economy. 

US stocks were rallying on Monday, unwinding Friday’s risk-off losses as the Syrian tensions ease.

The Dow Jones Industrial Average climbed through the 50-day MA located at 24,604 currently. Similarly, the S&P 500 was up by 1.1% closing in on its 50-day MA as well. The DXY was having a tough day while commodities struck back and the US yield curve flattens signalling a less expansionary path and markets have a rethink of the reflation trade in a quieter FX space to start the week where data was mixed. Retails sales was a beat but were offset by the miss in the Empire States Fed survey.

Key headlines: (sources, State TV, Livesqwark, WP).

Saudis intercept ballistic missile over Najran – State TV
Trump said to halt plan for more Russia sanctions – WP
Fed’s Kaplan now crossing the wires: expects 3 rate hikes 2018.
Fed’s Bostic: Fed has not seen much movement in wages.
Fed’s Dudley: could alter gradual hike path, more than 4 hikes in 2018 unlikely.
Fed’s Kashkari: wages growing slowly, suggesting slack still exists.
Fed’s Kaplan: cyclical wage pressures will build in 2018; sees 3 hikes this year.
Trump nominates Richard Clarida, Michelle Bowman to Fed board.
Trump walks back plan for more Russian sanctions, reversing Haley’s speech.
Trump swipes at Russian and Chinese currency ‘devaluations’.
Atlanta fed GDPnow for 1q18 falls below 2pct to 1.9pct.

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Markets are risk-on and the Dow Jones Industrial Average has just rocketed through a key watched level for the first time in more than a month. 

The DJIA  has climbed by 1.3% to 24,664 and through the 50-day MA located at 24,623 currently.

Similarly, the S&P 500 is up by 1.1% on Monday so far closing on its 50-day MA as well. The Nasdaq Composite Index is up by 1% just below its 50-day MA as optimism over the first-quarter earnings season lifts the benchmarks at the start of the week where investors have looked through the geopolitical concerns.

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