Commodities active around trade data and summit talks plus strong Canada employment gains

This article was last updated on April 16, 2022

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Market Insights

Commodities active around trade data and summit talks plus strong Canada employment gains

Stock markets continue to steadily climb/ The Nikkei stated a big 2.2% catch-up rally but other gains have been more moderate with the FTSE, DAX and US index futures all up about 0.2%. In currency trading, USD is flat or up slightly against gold and the other majors.

Overnight, Chinese imports and exports increased, boosting commodity process with the copper gaining 0.5% and WTI crude oil gaining 0.8%. Assurances form President Trump to Cjhinese Premier Xi that the US will maintain the One China policy have also been taken as a positive by traders.  Chicago Fed President Evans, a known dove at the FOMC, indicated three rate hikes this year would not be unreasonable, keeping up support for the greenback. We continued to see positive earnings out of the technology sector with Nvidia and Activision Blizzard beating the street.

There is still a lot of potential news on the way that could keep markets active right through to the weekend. Trade and infrastructure remain a big focus Friday with UK trade data and a summit meeting being held between US President Trump and Japanese PM Abe, with a press conference early afternoon. 

Canada posted another huge increase in jobs last month. Once again the street was way too pessimistic at (10K) and I wasn’t optimistic enough at 20K since Canada added 48K jobs last month. Full time jobs grew 15K less than last month’s massive increase while part time jobs rebounded by 32K. CAD is rallying on the news which weakens the case for the Bank of Canada to cut interest rates. The loonie may remain active through PM Trudeau’s meeting with President Trump on Monday.

FX RANGES TIGHTEN, YIELD SPREADS WIDEN

Market Briefs
• EUR/USD -0.1%, USD/JPY +0.3%, GBP/USD +0.1%,         
• DXY +0.15%, DAX +0.3%, Brent +1.2%, Gold -0.4%, Copper +1.8%
• US rates widen vs Germany, EZ yields push up vs Germany  
• Dollar hits 10-day high before Trump-Abe meeting – Rtrs
• Oil rises on 90 pct compliance on OPEC output deal – Rtrs
• UK Dec Indust Output +1.1% m/m, +4.3% y/y vs prev 2.0%/2.2% rvsd. 0.2%/3.2% f/c
• UK Dec Manuf Output +2.1% m/m, 4.0% y/y vs prev 1.4%/1.7% rvsd. 0.5%/1.8% f/c
• UK Dec Global goods trade balance -10.890bln vs prev -11.555bln rvsd. -11.50bln f/c
• China January exports rise 7.9 pct, beating forecasts – Rtrs
• Euro zone, IMF reach agreement on a common stance on Greece – Rtrs
• EG Dijsselbloem: Greek reforms taking long time but going in right direction – Rtrs
• ECB Mersch: Subdued inflation will be with us for quite some time – Rtrs
• Ireland asks EU for “invisible” post-Brexit UK border – Rtrs
• M&A news: Reckitt Benckiser to buy Mead Johnson for $16.6 bln – Rtrs

Currency Summaries

EUR/USD
• EUR a little lower 1.0667-36 on another quiet day
• Rate divergence on two fronts influences softer tone
• US rates widen vs Germany, EZ yields push up vs Germany
• Latter sparks some risk averse selling EUR vs JPY and CHF
• EUR 1 bln expiries at 1.0650 and 1.0600 a likely influence
• Michigan inflation expectations & US import/export prices next focus

USD/JPY
• USD/JPY rose from 113.23 to 113.85, ahead of the latest relapse
• Large supply ahead of 114.00 where Japanese exporters offers lay
• Hourly bearish engulfing highlights risk of a further intra-day falls
• 112.99 – 38.2% of 111.59 to 113.85 rise – good target for n-term bears
• Asia ran with Nakaso-Trump talk out on Thu, boosting USD further
• Trump’s ‘phenomenal’ tax announcement pledge was loved by mkt
• JPY further sold as Trump admin downplayed ccy manipulation
• USD/JPY Bearish Pivot http://reut.rs/2kztUgd

USD/CHF
• USD/CHF trades to a new 1.0033 high for the move on broad dollar gains
• Dollar got a boost on Trump tax plan pledge
• Break & close above dn TL fm Jan highs bolstered bullish sentiment
• 100-DMA provides support at 1.0010 session lows
• EUR/CHF off from 1.0681 to 1.0655 in Europe. New celing ahead of 1.07
• Holds close to historical June 24 Brexit 1.0624 low

GBP/USD
• GBP/USD fell to an early Ldn low of 1.2466 under the influence of M&A news
• Reckitt Benckiser has agreed to buy Mead Johnson for $16.6bln
• Ensuing climb to threaten 1.2522 spurred by better than expected UK data
• Big beats for Dec industrial/manufacturing output & construction output
• Dec goods trade deficit lower than expected too. 1.2522 = Asia high
• EUR/GBP dropped to threaten 0.8500 after UK data beats. 0.8537 = pre-data high

USD/CAD
• USD/CAD has traded a 35 pip range thus far Friday, 1.3123-1.3158
• Canada Jan jobs data 8.30am ET, zero employment growth f/c, jobless rate f/c 6.9%
• 1.3094 (Thursday’s low)& 1.3000 supports below 1.3123. Resistance 1.32

AUD/USD
• AUD/USD held below 0.7660/64 thru European am, 0.7635 = European am low
• 0.7618-0.7658 was Asia range. 0.7664 was Thursday high (0.7666 = Wednesday high)
• AUD/NZD ticked up to a fresh 3mth high of 1.0642 during the European am

NZD/USD
• NZD/USD is consolidating losses after NZD longs jettisoned post-RBNZ
• 0.7181-0.7198 was European am range to follow 0.7180-0.7206 Asia range
• 0.7172 was 17-day low Thursday. 0.7333 = Wednesday’s high, pre-RBNZ

FX OPTIONS
• 1mth expiry gets NFP today on top of ECB, 3mth captured French elections Weds
• USD/JPY gamma and topside bid after spot rally, Trump/Abe meet and Yellen focus
• EUR/USD long gamma 1.05-1.08 zone, deeper spot slide to maintain vol demand
• GBP/USD vols slightly softer on the week as intraday spot volatility calms
• AUD/USD spot and vols uninspired. CAD vols propped in to jobs data

COMMENT
A phone call helps ease US/China relationship concerns
President Trump has taken two vital steps in order to ease concerns over the direction the globally important US/China relationship is heading. Firstly, when Trump’s letter to President Xi was seen as a potential snub he was willing to make a phone call and second Trump will now respect the ‘One China policy”.

The latter is a significant step after Trump suggested in December that support for the One China policy was conditional on China doing a deal on trade with US. The fact that twitter has taken a backseat to a letter, then a phone call, are important communication steps in terms of international relations. The willingness to be less confrontational is a good start as other items remain on the agenda such as the US/China trade balance and South China Sea.

A first test will come on or about March 20, when the US International Trade Commission will make a final determination of injury to US producers. This follows the determination from US Commerce Department last week that imports of stainless steel sheet and strip from China were being subsidized and dumped in the US below fair value.