Date: MAY12, 2018
Daily World Economic and Financial News
(CNBC) : MAY12, 2018---- The dollar fell for a third day on Friday against a basket of currencies as traders booked gains on its recent run-up tied to the widening interest rate gaps in favor of the United States and signs of cooling growth in the rest of the world.
The Swedish crown continued its rally, as more traders exited their bearish bets on hints that some Riksbank officials are open to raising interest rates despite worries about low inflation. The euro rose for a second day as the greenback retreated further from a 2018 peak reached earlier this week. The single currency, however, was still on track for a loss for a fourth straight week against the dollar.
(CNBC): MAY12, 2018---- An index that tracks the dollar versus six currencies rose initially before selling re-emerged. It was down 0.11 percent at 92.54, after hitting its strongest level of the year at 93.416 on Wednesday. The dollar index posted a slim 0.04 percent loss on the week in late trading, following three straight weeks of gains.
The euro scored a 0.24 percent gain at $1.1942 and a 0.18 percent rise against the Japanese currency at 130.53 yen. On the week, the common currency was set to fall 0.15 percent against the greenback and to eke out about a 0.08 percent gain versus the yen.
(REUTERS) : MAY12, 2018---- European stocks edged higher in early trading on Friday, set to seal their longest winning streak in over three years as fresh deal-making stole the spotlight from the tail-end of a busy earnings season.
(WSJ) : MAY12, 2018---- American households remained relatively confident about the economy in early May. The University of Michigan said Friday its index of consumer sentiment was 98.8 in May, unchanged from April. That was a little better than the 98.0 that economists had expected for the month’s preliminary reading; a final figure will be announced May 25.
(BLOOMBERG) : MAY12, 2018---- The Czech Republic is back on investors’ radar as a prime candidate for another increase in interest rates this year. After watching policy makers in Prague take the lead in Europe’s turn to monetary tightening with three hikes between August and February, derivatives markets swung to skepticism that they will raise borrowing costs again this year. But traders are now piling into bets that another increase will come within six months after an inflation revival in April added to the surprisingly hawkish resolve on display at last week’s policy meeting.
USD/JPY PAIR ANALYSIS
The EUR/USD pair is closing the week as it started, around 1.1950, bouncing from a fresh yearly low of 1.1822, with the common currency being helped by soft US inflationary pressures, which suggest that the Fed's monetary path will remain unchanged, with two more rate hikes for this year, and chances of an extra one diminishing. The news came following a Fed's uneventful meeting, and a Nonfarm Payroll report that showed that wages' growth remained subdued. The pair's recovery came on the back of dollar's weakness, as things are no better in Europe to trigger firm demand for the common currency. In fact, European inflation is in far worse shape than the US one and hopes that the ECB could trim QE next September are also fewer, moreover considering that economic growth has continued to decelerate at the beginning of Q1.
Dollar's rally was triggered by easing risk aversion and solid local data. Both factors have suffered little changes ever since the move stated mid-April, with the clear exception being inflationary pressures that are least are not retreating but stagnated. Limiting dollar's decline were higher yields and the positive mood among US equities' traders, as government bond yields end the week on a higher note, albeit of their weekly highs, while US indexes hover at two-month highs ahead of the close.
Action this upcoming week will begin on Tuesday, with revisions of EU and German Q1 GDP, with the first seen and unchanged but the second expected with a downward revision. The ZEW survey will be released alongside, and despite a slight improvement is expected in May, the economic sentiment is expected to remain depressed. Later on the day, US April retail sales are seen bouncing from March soft figures. If the numbers come in line with market's forecast, will highlight the imbalances between both economies, and end up benefiting the greenback. Wednesday will bring the final figures of EU inflation for April, which could add to EUR woes.
EUR/USD technical outlook
The EUR/USD pair's recovery was among the shallowest, considering the pair was unable to surpass its weekly opening or the 23.6% retracement of its latest decline, a clear sign that market players may not be willing to keep on buying the USD, but for sure, the EUR is not their first option. The downward momentum eased, but the pair is firmly bearish according to technical readings, as in the weekly chart, the price moved further below its 20 SMA, which lost its upward strength and turned flat, while technical indicators have pared their declines but remain within negative territory with no signs of changing course.
In the daily chart, technical indicators have corrected extreme oversold conditions, maintaining strong upward slopes but well below their mid-lines, not enough to confirm an upward continuation, particularly considering that the pair is developing well below its moving averages, with the 20 DMA heading sharply lower and headed to cross below the 200 DMA, this last, converging with the 38.2% retracement of the latest weekly decline at 1.2060. The bearish trend that persisted for the last month, will be definitively over if the pair is able to overcome this last. In the meantime, the movement should be understood as corrective. Beyond 1.1960, the next resistance is the 1.2000 figure en route to the mentioned 1.2060 region, while supports this week come at 1.1880 first and 1.1820 then, with a decline below this last opening doors for an extension toward 1.1660.(FXSTREET)
International & Financial Terms
1. Reserve Currency: Currency which is internationally acceptable and is used by central banks to meet their financial commitments.
2. Stagflation: Recession or severe economic slowdown.
3. Safeguard: Temporary action to protect the domestic economy of a flood of imports.
4. Settlement: Inter central bank payments to cover external deficit.
5. Reflation: The administered recovery of an economy.
Compiler: A Bank Dealing Room Section
Management of International Deputy The Expert In Charge Of Dealing Room