Forex News

Stock futures in the US cut some of the early losses on Thursday, with the three major averages falling about 0.1% only, after initial jobless claims unexpectedly soared to 6-month highs, offering further evidence the labour market is softening, and paving the way for a Fed interest rate cut. However, comments from several policymakers have been suggesting rates will stay elevated for some more time. PPI and CPI data due next week should provide further clarity on price pressures. Meanwhile, the earnings season continues with shares of Airbnb sinking about 9% in premarket trading after reporting a disappointing sales outlook, despite strong results for the quarter. Also, Arm Holdings Plc tumbled almost 9% after a weak revenue forecast. Among megacap stocks, Microsoft (-0.1%), Apple (-0.3%), Nvidia (-0.2%), Amazon (-0.4%), Meta (-0.3%) and Alphabet (-0.3%) were all lower before the opening bell.

The number of people claiming unemployment benefits in the US surged by 22,000 to 231,000 on the week ending May 4th, the highest since November 2023, and sharply above market expectations of 210,000. The high reading halted the streak of four consecutive downside surprises, pointing to a sharp and sudden breakthrough of weakness in the labor market, and backing the argument for the Federal Reserve to anticipate the gradual loosening of monetary policy. The four-week moving average for initial claims, which removes week-to-week volatility, jumped by 4,750 to 215,000. On a non-seasonally adjusted basis, claims rose by 19,690 to 209,324, with sharp increases noted in New York (10,248) California (4,198), Indiana (2,439), and Illinois (2,003).

Mexico's annual inflation rate picked up to 4.65% in April 2024, from 4.42% in the previous month, and largely matching market forecasts of 4.63%. Main upward pressure stemmed from prices of food & non-alcoholic beverages (5.78% vs 4.96% in March); alcoholic beverages & tobacco (4.95% vs 4.78%), and housing & utilities (3.76% vs 3.35%). The annual core inflation rate eased for the 15th straight month to 4.37% in April, the lowest since May 2021, down from 4.55% in the prior period. Monthly, the CPI rose by 0.2% in April, down from a 0.29% increase in the last month and in line with the market's anticipated 0.19% rise.

Stock futures in the US were lower on Thursday, with the three major averages losing 0.2%, following a lackluster session the day before. Traders continue to assess the outlook for the Fed's policy, with comments from several policymakers suggesting rates will stay elevated for some more time. PPI and CPI data due next week should provide further clarity on price pressures. Meanwhile, the earnings season continues with shares of Airbnb sinking about 9% in premarket trading after reporting a disappointing sales outlook, despite strong results for the quarter. Also, Arm Holdings Plc tumbled almost 9% after a weak revenue forecast. Among megacap stocks, Microsoft (-0.1%), Apple (-0.3%), Nvidia (-0.2%), Amazon (-0.4%), Meta (-0.3%) and Alphabet (-0.3%) were all lower before the opening bell.

The STOXX 50 was down 0.3% and the STOXX 600 was flat to lower on Wednesday, pausing after four consecutive sessions of gains which sent the latter to fresh record levels. Traders continue to assess prospects for lower interest rates, with the latest Bank of England monetary policy decision showing growing support for a policy shift. Shares of LVMH fell 1.1%, Inditex declined 2.5% and BBVA sank almost 6% after the lender made an €11.5 billion hostile takeover for Banco de Sabadell, folowing Sabadell’s board rejected an unsolicited all-share merger offer earlier this week. Also, Telefonica was around the flatline even though the company's profit meet forecasts. Mercedes-Benz plunged more than 5.5% as the company is trading ex-dividend. On the other hand, Siemens added about 1% and Deutsche Telekom gained 0.8%.

The FTSE 100 continued its upward trajectory on Thursday, poised to achieve another record high closing after the Bank of England moved closer to cutting interest rates. The BoE kept interest rates unchanged but two committee members preferred to reduce the rate by 0.25pp, compared to only one member in the previous meeting. The news prompted a positive shift in interest rate-sensitive sectors like homebuilders, which rebounded from a lower start at the beginning of the session. Meanwhile, BAE Systems were up more than 1% after reaffirming its sales and earnings are set to grow further due to geopolitical tensions. Also, IMI Plc, a specialist engineering firm reaffirmed its full-year guidance. On the other hand, 3i Group sank more than 4% after releasing a net asset value per share for fiscal 2024 slightly below expectations and issuing a cautious outlook. Finally, HSBC was down 4% as it traded ex-dividend.

Manufacturing production in South Africa slipped by 6.4% year-on-year in March 2024, following a downwardly revised 4% rise in the prior month and surprising markets that expected a 0.4% increase. This marks the first decline in industrial activity in six months and the steepest since April 2022, mainly due to a 25.9% tumble in the manufacture of motor vehicles, parts and accessories and other transport equipment. Steep reductions in output were also recorded in some other subsectors, including basic iron and steel, non-ferrous metal products, metal products and machinery (-9%); textiles, clothing, leather and footwear (-9.4%) and petroleum, chemical products, rubber and plastic products (-3.9%). On a seasonally adjusted monthly basis, industrial output shrank by 2.2% in March, the most in nearly 1-1/2-years, after a 1% decrease in the prior month. Seasonally adjusted manufacturing production fell by 1.0% in the first quarter of 2024 compared with the fourth quarter of 2023.

The yield on the UK’s 10-year Gilt retreated sharply to below 4.15% in May, the lowest in one month, amid dovish signals from the Bank of England in its latest decision. The BoE left its key interest rate unchanged at 5.25%, as largely expected, but more MPC members supported a rate cut than expected by the City. Additionally, Governor Andrew Bailey noted that the Bank is confident that inflation is likely to fall close to its 2% target in the coming months, and maintained the view that monetary policy will remain restrictive even with a rate cut. The developments drove markets to increase bets of an incoming rate cut by the Bank this quarter, with investors being loosely split in pricing a cut in the upcoming June meeting, while a 25bps rate cut for August is fully priced.

The British pound fell slightly more to below $1.25 on Thursday, after the Bank of England left interest rates steady as expected. However, two members voted for a rate cut, one more than in the previous meeting, signaling growing support for lower borrowing costs. Also, Governor Bailey said it is “likely we will need to cut the bank rates over the coming quarters and make monetary policy less restrictive, possibly more than currently priced into market rates". Traders slightly raised their bets for a June cut but a 25bps reduction in August continues to be fully priced in. Meanwhile, policymakers cut their inflation forecast and raised the outlook for growth.

The Bank of England's Monetary Policy Committee voted to maintain the Bank Rate at 5.25% in its May meeting, with two members preferring a 0.25 percentage point reduction. Economic projections foresee a decline in Bank Rate from 5.25% to 3.75% by the end of the forecast period. Despite a projected GDP growth of 0.4% in Q1 2024, economic demand is expected to remain weaker than potential supply growth, leading to a margin of economic slack. Inflation indicators suggest a decline in services consumer price inflation but remain elevated at 6.0% in March. CPI inflation is expected to return close to the 2% target in the near term, with potential risks from geopolitical factors. The MPC emphasizes the need for a restrictive monetary policy to return inflation sustainably to the 2% target, with a commitment to adjusting policy as warranted by economic data.

GB100 increased to an all-time high of 8379.00 Index Points. Over the past 4 weeks, United Kingdom Stock Market Index (GB100) gained 4.84%, and in the last 12 months, it increased 8.08%.

Industrial production in Ireland increased by 35.2% year-on-year in March 2024, the highest growth rate since November 2022, after an upwardly revised contraction of 34.7% in the previous month. Manufacturing output rebounded (35.6% vs -37.5%) as production increased for food products (+27.9%), textiles, wearing apparels & leather products (+6.3%), basic metals & metal products (+24.3%) and electricity, gas, steam & air conditioning supplies (+28.8%). In contrast, production slumped for wood & wood products exc. furniture (-20.6%) and rubber & plastic products (-7.9%). On a monthly basis, industrial production grew by 12.8%, after an upwardly revised 5.8% increase in February.

The EU-standard Harmonized Index of Consumer Prices in Ireland rose by 1.6% year-on-year in April 2024, slowing marginally from a 1.7% increase in March and marking the lowest reading since June 2021, final estimates showed. Cost grew at a weaker pace for recreation & culture (5.1% vs 8.3%), restaurants & hotels (4.9% vs 5.5%), and food (2.6% vs 2.9%) and fell for housing & utilities (-4% vs -4.2%) and clothing & footwear (-6.6% vs -6.7%). In contrast, inflation accelerated for transport (4.3% vs 3.8%). Monthly, harmonized consumer prices advanced by 0.2%.

The annual inflation rate in Ireland eased to 2.6 percent in April 2024, reaching a fresh 33-month low, from 2.9 percent in the previous month. Prices eased for food & non-alcoholic beverages (2.7 percent vs 3 percent in March), housing & utilities (0.5 percent vs 1 percent), recreation & culture (5.2 percent vs 8.3 percent), and restaurant & hotels (4.8 percent vs 5.5 percent). In addition, costs fell further for clothing & footwear (-6.7 percent vs -6.6 percent) and furniture & household equipment (-0.8 percent vs -0.6 percent). On the other hand, prices advanced faster for alcoholic beverages & tobacco (4.7 percent vs 3.2 percent), health (2.4 percent vs 2.2 percent), and transportation (4.1 percent vs 3.7 percent). On a monthly basis, consumer prices went up by 0.2 percent, after a 0.5 percent increase in March.

Steel rebar futures were near CNY 3,500 per tonne in May, remaining close to their lowest level in three weeks and holding a 10% slump year-to-date as low construction demand in China drove the world’s top steel producer to flood foreign markets with their supply. New data showed that steel exports out of China soared by nearly 30% to 35 million tonnes in the year through April. The increase in steel availability to foreign markets drove turnover to fall by 10% in the period, despite the surge in volume, as low domestic demand drove steel mills to allocate sales to foreign clients. The data matched pledges from the Chinese Politburo to tackle oversupply problems in the country’s residential property market, marking a shift from past pledges to build more social housing, and hampering the outlook for steel-buying from future constructors. This aligned with Brazil and Turkey's launch of probes against Chinese steel dumping, while the US extended tariffs against the country.

Government bond yields are trading higher on Thursday. Top gainers are New Zealand 10Y (6.22bps), Italy 10Y (6.20bps) and Greece 10Y (5.30bps). Biggest losers are Mexico 10Y (-1.20bps) and India 10Y (-0.50bps).

The FTSE MIB maintained stability around the 34,150 mark on Thursday, in line with its European peers, with traders exercising caution as they evaluated recent corporate performances and future monetary policy prospects. Noteworthy was Nexi's remarkable surge of 6%, driven by a quarterly report surpassing expectations. Prysmian also saw a rise of approximately 2%, buoyed by financial results indicating a modest profit increase and reaffirmation of this year's targets. In contrast, Bper Banca experienced a sharp decline of over 4%, despite announcing a 57% profit growth from the previous year, slightly better than estimates. Enel and Pirelli's results are expected later today.

Copper prices were at the $4.55 per pound mark, holding relatively close to the two-year high of $4.7 on April 29th as markets continued to assess near-term demand and concerns of supply deficits in the long term. Official trade data from China showed that imports of copper ore jumped by 11.8% from the previous year to 2.35 million tonnes in April, indicating that the world’s top producer of refined copper continued to take in large volumes of inputs despite the sharp increase in prices. The figures were in line with the pickup in factory activity indicated by the country’s PMIs during the period. In turn, the pessimistic availability of future copper ore due to setbacks in key mines hampered margins for smelters in China, responsible for over half of global supply, resulting in a potential 10% output cut this year. High costs of committing to new mines drove giant miners toward M&A activity instead of starting new projects, recently headlined by BHP’s attempt to buy Anglo American.

Top currency losers are South Korean Won (-0.51%) and Japanese Yen (-0.32%). In addition, there was a slight change on Dollar Index (0.18%), Euro (-0.17%) and British Pound (-0.15%).

Dominican Republic's annual inflation rate ticked down to 3.03% in April 2024 from 3.38% in the previous month. This was the lowest reading since June 2020, due to a slowdown in prices of food & non-alcoholic beverages (4.19% vs 5.42% in March), alcoholic beverages & tobacco (1.83% vs 1.85%), furniture & household items (1.88% vs 2.01%), recreation & culture (2.05% vs 2.63%), restaurants & hotels (6.3% vs 6.45%), and miscellaneous goods & services (6% vs 6.34%). Concurrently, costs fell further for clothing & footwear (-1.74% vs -1.7%) and housing & utilities (-0.5% vs -0.38%). On the other hand, price growth was seen from health (5.2% vs 5.1%), transport (1.24% vs 1.19%), communication (2.54% vs 1.92%), and education (5.6% vs 5.51%). Monthly, consumer prices decreased by 0.1% in April, the first decline since May 2023, after a 0.3% rise in March.