Market Overview

Dollar is steady against European majors as FOMC rate decision looms. Job data from US is basically in line with expectation and triggers little reactions. Instead, news regarding ultra-long bonds sends the Japanese Yen lower again. Released from US, ADP report showed 177k growth in private sector jobs in April, comparing to expectation of 178k. The US Treasury Department said today that it's conducting an "internal review" regarding ultra-long bonds. The department was meeting with "a broad variety of market participants" regarding the pros and cons of 50-year and 100-year securities. Earlier this week, Treasury Secretary Steven Mnuchin said that ultra-long bonds absolutely makes sense to the Treasury. 30 year yield jumped on Monday after Mnuchin's comments.

Dollar strengthens mildly as markets await FOMC rate decision but momentum is limited against European majors. Notable moves are seen in Canadian dollar which is weighed down by oil prices. Meanwhile, Australian Dollar follows stocks lower but is holding above near term support at 0.7439 against Dollar. The Aussie is possibly weighed down by selling against New Zealand Dollar too after impressive job data of the latter. Sterling is also generally weaker today on news that EU is raising the amount of the Brexit deal for UK to EUR 100b. Meanwhile, Euro is also a touch softer ahead of French election TV debate.

Yen weakens broadly as concerns over North Korea tensions continue. Japan Finance Minister spoke in a conference in California, US, yesterday. He warned that while yen is always "said to be a safe-haven currency", the situation in North Korea made it "extremely unstable". And he emphasized that "we should always think about what the yen would be like if something happens in North Korea." Regarding trade relationship, Aso said Japan and 10 other countries should push ahead with the Trans-Pacific Partnership with the involvement of the US. But he is optimistic that US will eventually find it better to rejoin. He said that "it's not a fact that the U.S. will be able to gain more from bilateral framework than TPP." The Japanese currency is also weighed down by renewed strength in US treasury yields. US Treasury Secretary Steven Mnuchin said yesterday that ultra-long bonds are "something that could absolutely make sense for us at Treasury."

In US, long term treasury yields jumped after Treasury Secretary Steven Mnuchin said yesterday that ultra-long bonds are "something that could absolutely make sense for us at Treasury." 30 year yield rose 0.059 to close at 3.011, back above 3.000 handle and took out 55 day EMA. 10 year yield also rose 0.043 to close at 2.325, but was limited below last week's high and 55 day EMA. Mnuchin also said that it will probably take two years to hit 3% growth, with the help of tax and regulatory reforms, as well as better international trade agreements. He emphasized that USD 2% in revenue can be generally over 10 years if growth is boosted from 2% to 3%. Dollar is trading mixed after weaker than expected ISM manufacturing released overnight. NASDAQ extended the record run and rose 0.73% to close at 6091.6. S&P 500 also rose 0.17% but was limited below 2400 handle. DJIA lost -0.13%.

Dollar turns mixed in early US session after weaker than expected economic data. Personal income rose 0.2% in March versus consensus of 0.3%. Personal spending rose 0.0% versus consensus of 0.2%. Headline CPI slowed to 1.8% yoy, down from 2.1% yoy. Core PCE slowed to 1.6% yoy down from 1.8% yoy. Dollar traders will look into the string of key events this week for guidance. Fed is widely expected to keep policies unchanged on Wednesday. But at this point, Fed fund futures are pricing in over 60% of a June hike. Markets would be eager to get some hints for that in this week's FOMC statement. Meanwhile, ISM indices and non-farm payroll would shed some lights on how the US economy would rebound after a weak Q1.

Dollar trades mildly higher in Asian session today. Trading is subdued with China, Swiss, France, Germany, Italy and UK on holiday. The greenback is lifted mildly by news that the US Congress has reached a tentative agreement on a USD 1T bill to keep the government running through the end of September. A vote could be held as early as Tuesday to confirm. And this would prevent a government shut down. But the real tests for the greenback would be from economic data and FOMC meeting. Fed is widely expected to keep policies unchanged this week. But at this point, Fed fund futures are pricing in over 60% of a June hike. Markets would be eager to get some hints for that in this week's FOMC statement. Meanwhile, ISM indices and non-farm payroll would shed some lights on how the US economy would rebound after a weak Q1..

Euro surged sharply for the initial part of last week as boosted by the result of French president election. The common currency ended the week as the strongest major currency. But it has clearly lost some momentum after a balanced ECB press conference. On the other hand, Sterling continued to defy gravity and picked up momentum again towards the end of the week. The British Pound has indeed ended April as the strongest major currency for the month. The weakness in the Japanese Yen might take some attention. But it was the selloff in commodity currencies, in a risk-seeking environment, that is worth the watch. Meanwhile, Dollar found no support from US President Donald Trump's tax plan, but it didn't react negatively to Q1 GDP miss neither.

Dollar is mild pressure against European majors in early US session after weaker than expected growth data. Q1 GDP in US grew 0.7% annualized, sharply lower than prior quarter's 2.1% and missed expectation of 1.1%. While it's common to have a soft first quarter in recent years, the miss could prompt some adjustment in market's expectation on overall growth for the year. GDP price index, on the other hand, rose 2.3%, up from prior quarter's 2.1% and beat expectation of 2.0%. Employment cost index rose 0.8% in Q1, above expectation of 0.6%. While the greenback stays weak against European majors, in particular Sterling, it's showing some strength against Aussie and Yen and stays firm against Canadian Dollar.

The financial markets are rather steady as the week is heading for close. Euro remains the strongest major currency for the week even though it's losing some upside momentum. In particular, there is some selling seen in the common currency after ECB press conference yesterday. And on the other hand, Sterling is picking up momentum in Asian session and could overtake Euro's place. Japanese Yen and commodity currencies are generally weak. Canadian dollar got a brief lift on news that US is staying with NAFTA earlier this week. But renewed selling in crude oil is dragging down the Loonie again. Dollar is trading mixed for the moment as markets found little inspiration from US President Donald Trump's tax plan.

Euro is staying in tight range against Dollar and Yen, and weakens against Sterling. ECB kept monetary policies unchanged today as widely expected. The key interest rate is held at 0.00%, marginal lending facility rate at 0.25% and the deposit facility rate at -0.40%. Asset purchase at was also kept unchanged at EUR 60b per month. ECB President Mario Draghi said in the post meeting press conference that "downside risks have further diminished" as data confirmed "cyclical recovery of euro area economy is becoming increasingly solid". And he also described the improving growth and recovery as "solid and broad".

The financial markets had very little reaction to the highly anticipated announcement of tax reforms by US President Donald Trump. DJIA reversed earlier gains and closed slightly lower by -0.1% at 20975.09. S&P 500 also closed down -0.05% at 2387.56. Both were held below record intraday highs of 21169.11 and 2400.98 respectively. 10 year yield also closed lower, losing -0.016, at 2.311. The dollar index struggled to find follow through buying above 99 and is back at 98.90 in Asian session. In the currency markets, Euro remains the strongest major currency for the week, followed by Sterling and Swiss Franc. Yen remains the weakest one after BoJ stands pat, raised growth forecast but lowered inflation projections. Canadian dollar is still trading down for the week but is given a mild boost on news that US will stay with NAFTA for the moment.

Dollar strengthens broadly today as markets are eagerly awaiting US President Donald Trump's tax reform plan. Dollar index is back above 99 after dipping to as low as 98.69 earlier this week. Meanwhile, stocks are also looking for fresh stimulus as DJIA and S&P 500 are looking at making new records highs. On the other hand, Euro and other European majors are paring some gains as the boost from French election fades. Euro traders are also getting cautious ahead of tomorrow's ECB rate announcement and press conference. The Japanese Yen stays soft, except versus Aussie and Kiwi, as tensions in North Korea escalates. Canadian Dollar, on the other hand, is recovering mildly despite weak retail sales.

Markets remain in full risk on mode this week. DJIA gained 232.23 pts or 1.12% to close at 20996.12 overnight. S&P 500 also rose 14.46 pts or 0.61% to close at 2388.61. Both indices took out structural resistance at 20887.5 and 2378.36 respectively and should be heading for new record highs. Meanwhile, NASDAQ maintains its lead and closed at new record high at 6025.49, up 0.7%. Treasury yields also jumped with 10 year yield closing up 0.054 at 2.327. That compares to last week's low at 2.177 and structural resistance at 2.391. A break above 2.391 will pave the way for a test on 2.621 key near term resistance. Dollar stays weak against European majors though. But the dollar index is losing some downside momentum below 98.85 support.

European majors stay generally firm today, continuing to ride on the boost from French election result. Meanwhile, Dollar closely follow as strong risk appetite lifts Fed rate hike expectations. Meanwhile, markets are eagerly waiting for US President Donald Trump to announce his tax reforms. Commodity currencies are generally under pressure and decoupled from stock markets. In particular, Canadian Dollar is pressured by weakness in oil prices, as well as US's announcement of tariffs for lumber products.

The global financial markets were blessed by centrist Emmanuel Macron's win in the first round of French presidential election. CAC 40 gained 4.14% yesterday to close at 9 year high at 5268.85. DAX rose 3.37% to close at record high at 12454.98. In particular, CAC took out prior resistance at 5142.81 by a margin. DAX's break of prior resistance at 12390.75 was also solid. US indices followed with NASDAQ closing at record high at 5983.82, up 1.24%. DJIA and S&P 500 rose 1.05% and 1.08% resistance but are both kept well below recent highs so far. Asian equities follow with Nikkei trading back above 19000 handle.

Euro pares back some French election triggered gains, but stays broadly higher against all other major currencies. Meanwhile, Japanese Yen is trading as the weakest as markets are on risk on mode. Markets generally welcome the results of the election and centrist Emmanuel Macron's win in the first round is seen as a boost to the Euro. Forward Eonia bank-to-bank rates also imply a roughly 60% chance of a 10bps hike by ECB by the end of March 2018, up from just 20% chance last week. European stocks are trading broadly higher with CAC up 4.5%, DAX up 3.1% and FTSE up 1.9% at the time of writing. In other markets, Gold drops sharply to as low as 1266.0, down more than -1.3% today. WTI recovers mildly but fails to find follow through buying above 50 handle.

Euro soars across the broad today as markets are happy with the results of the first round of French presidential election. With 97% of the vote counted, centrist Emmanuel Macron and far-right Marine Le Pen secured 23.9% and 21.4% support respectively. And as generally expected, they will enter the second and final round of the French election, scheduled on May 7. Higher support for Macron is also seen as a sign of solid support for staying with Euro. Meanwhile, after accepting defeat conservative Francois Fillon and leftist Benoit Hamon called their supports to choose Macron over Le Pen. According to recent polls by Ifop, Ipsos and Elabe, Macron would easily beat Le Pen in a head-to-head run-off, by a wide margin.

Geopolitical tensions somewhat took a back seat last week. The headlines were filled by news of UK snap election, French election, and to a lesser extent US tax reform. Sterling ended the week as the strongest major currency after boosted by the news of snap election and prospect of a "softer" Brexit. Euro survived the terrorist attack in Paris and French election uncertainties to end as the second strongest one. Dollar ended the week mixed as markets seemed not too convinced by news of Trump administration's tax reform. Meanwhile, Canadian Dollar ended as the weakest one as dragged down by WTI crude oil's sharp fall and break of 50 handle. The result of French election on Sunday will be the first market mover this week.

Euro dips further today as markets are lighting up positions ahead of the first round of French presidential election this Sunday. Far right Marine Le Pen and centrist Emmanuel Macron are still tipped to come out as winners and head to the run-off on May 7. But yesterday's terrorist attack in Paris could stir up some uncertainties. In particular, far left leader Jean-Luc Melenchon has rather strong momentum in the past two weeks and emerged as a real contender. Euro would very likely suffer if Melenchon could slip into the run-off and take Macron's place. Both Le Pen and Melenchon are euro-sceptic, just at two different extremes. But the common currency could have a relieve rally next week if the election delivers no surprise.

Euro dropped notably against Dollar overnight after news of terrorist attack in Paris, just ahead of presidential election this Sunday. A shooting occurred on the famous Champs-Elysees shopping boulevard, resulting in death of one police and injuries of two others. The Islamic State group claimed responsibility for the shooting. The incident disrupts the election campaign as conservative candidate Francois Fillon cancelled his trip to the Alps to "first show our solidarity with the police". Far-left Jean-Luc Melenchon said urged people to "attend to our duties as citizens: no panic, we shouldn't interrupt our democratic process". Far-right Marine Le Pen said she was "deeply angry" on the shooting and sad for the victims. Centrist Emmanuel Macron said that "this threat, this imponderable problem, is part of our daily lives for the years to come."