Euro Weighs On Dollar As Economy Expands At 1.7%, ASX Futures Flat Ahead Of Wage Data

The Euro gained +0.99% against the dollar on Tuesday following a better than anticipated trade surplus and GDP growth that was in line with expectations. Month-on-month for March to trade balance rose to a surplus of 30.9 billion Euros (not seasonally adjusted) compared with a prior reading of 17.8 billion and estimates for 25.8 billion. Meanwhile the Euro-zone economy expanded at +1.7% year-on-year for the first quarter of 2017 in line with market estimates. Equity markets were mixed, with both the Euro Stoxx 600 & DAX30 down just -0.02%, Spain’s IBEX35 up +0.22% and France’s CAC40 down -0.21%. Tonight Euro-zone inflation data will be released at 7:00pm AEDT.

British equities rallied to a new all-time high with the FTSE100 gaining +0.91% to close at 7,522.03 while the more domestic focused FTSE250 index rose +0.63% to close within one point of its record. This occurred despite inflation data which rose more than expected, year-on-year headline prices rose +2.7% from +2.3% topping estimates for +2.6% while a core measure also gained more than anticipated, rising +2.4% from +1.8% against forecasts for +2.3%. Producer prices, which are a forward indicator for future inflation also rose more than anticipated, rose +3.6% compared with estimates for a +3.4% gain. Tonight we’ll get a look at the unemployment rate due out at 6:30pm AEDT.

The U.S. dollar index dropped -0.73% overnight, weighed on as housing data disappointed with new housing starts (MoM Apr) decreasing -2.6% compared with estimates for +3.7% growth and building permits for the same period decreased -2.5% against forecasts for a +0.2% gain. The first chart below shows the U.S. dollar index futures which have now given back the post-election gains as optimism about Trump’s and the Republican party’s ability to push ahead with tax reform and fiscal spending have diminished.

While these measures would further improve the U.S. economy, they are not essential to its success. Forecasts are for a speedy rebound in Q2 GDP following the seasonally weaker growth in Q1, unemployment is sitting at 4.4%, inflation is well on it’s way to the FOMC’s target of 2% and U.S. companies are reporting very healthy earnings growth of 14.8% growth for Q1 for S&P500 companies.

Locally the ASX200 index closed up +12.12 points or +0.21% at 5,850.52 with the key support level shown on the second chart below between 5,827 and 5,800, marked by prior highs and lows over the past five months as well as the 50-day moving average has once again held. This morning we can expect a flat start to trade, with ASX SPI200 futures up just +1 point in overnight trading. Importantly we’ll also see wage growth figures due out at 11:30am with forecasts for growth to remain at the record low +1.9%. If you’re interested in trading global markets and still need practice, click here to open a free $100,000 Rivkin Trader account.

Data releases:

·         Australian Westpac Consumer Confidence (MoM May) 10:30am AEDT

·         Australian Wage Cost Index (QoQ & YoY Q1) 11:30am AEDT

·         U.K. Unemployment And Average Weekly Earnings (3M/YoY Mar) 6:30pm AEDT

·         Euro-zone Inflation (MoM & YoY Apr) 7:00pm AEDT

·         U.S. Crude Oil Inventories (May 12th) 12:30am AEDT

Chart 1 – U.S. Dollar Index Futures


Chart 2 – ASX200 Index


Source: Rivkin, RivkinTrader

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This article was written by James Woods - Global Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via james.woods@rivkin.com.au or by phoning +612 8302 3631.

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