Markets Remain Stable Ahead of Busy Week

Market Reviews

The US dollar was stably against the basket of major currencies on Monday, having retreated from the 3.5-month high at the end of last week, which was caused by a decrease in the base yield of 10-year US Treasuries. The British pound and Swiss franc are also strong, while the Japanese yen and Australian dollar are trading lower. Today’s data showed, the official China manufacturing PMI fell by 0.1 to 51.4 in April, slightly above expectation of 51.3. Non-manufacturing PMI increased by 0.2 to 54.8, above the forecast of 54.5.

This week is full of important events including RBA rate decision on Tuesday and FOMC announcement of Wednesday. Today, Germany releases CPI and US will publish personal income and spending. The Eurozone will publish Q1 GDP as well as April inflation and unemployment rate. US non-farm payrolls are awaited on Friday.

Fed is awaited to keep federal funds rate unchanged at 1.50-1.75% this week. The expectation for another hike in September grew. Fed fund futures are pricing in 77.5% chance of a hike to 2.00-2.25% in September.

RBA will announce rate decision tomorrow, and, it’s expected the it would keep the cash rate unchanged at 1.50%, and maintain a neutral stance. Earlier, the RBA projected GDP to grow 3.25% in both 2018 and 2019. Inflation is expected to hit 1.75% in 2018 and 2.00% in 2019.

The temporary exemptions on US steel and aluminum tariffs will expire tomorrow on May 1. There is little progress made on trade negotiation between the US and other countries. Meanwhile, NAFTA negotiations made some progress last week. Talks will resume on May 7 after. It’s believed that Canada and Mexico will have their exemptions extended but it’s only confirmed when it’s announced.