LATAM: Summary – June 05
Jun-05 10:24
- Brazil industrial production figures for April are due on Wednesday, followed by services and composite PMI data for May. Elsewhere, Argentina April IP and construction activity data will cross, while in Mexico the latest Banamex survey will be published. In the G10, the Bank of Canada is expected to deliver a first 25bp cut of the cycle, while in the US ADP employment and ISM services data for May are due, ahead of Friday's Nonfarm Payrolls release.
- Global News:
- US / ISRAEL – Hamas has followed Israel in balking at President Biden’s efforts to end their war in Gaza, with both sides saying their conflicting conditions for a permanent cease-fire must be met before they’ll even agree to pause fighting. A Hamas spokesman said Tuesday that Israel must commit to a permanent cease-fire and full withdrawal from Gaza. That came a day after Israeli PM Netanyahu reaffirmed his position that the group’s political and military operations must be destroyed before the war is ended.
- CANADA (MNI) – Markets are ~80% priced for a 25bp cut to 4.75% today, although a sizeable minority see the Bank of Canada holding until July (or later). Those that see a July, rather than a June, cut cite Fed re-pricing, the dangers of US-Canadian rate differentials and the still-booming local housing market. Any potential rate cut should be accompanied by clear communication that the pace of easing ahead will be gradual to prevent an even wider gap between US and Canadian rates, and the implicit impact on the exchange rate.
- INDIA – Prime Minister Narendra Modi is gearing up for coalition talks after his party lost its majority in parliament, forcing him to rely on allies to form a government for the first time since he stormed to power a decade ago. Modi’s Bharatiya Janata Party needs to secure the support of two regional allies, who are notoriously unreliable, to stay in office for a third term. The BJP-led National Democratic Alliance is expected to hold a meeting in New Delhi Wednesday afternoon.
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Historical bullets
BONDS: Core FI heads higher with little new news driving the move
May-06 10:22
- Treasuries remain within Friday's ranges as we approach the US open while Bund futures have breached Friday's highs by around 5 ticks.
- The main event of the morning has been the European final services PMIs which saw some upside surprises driven by Spain and an upward revision to the French number from the flash estimate. However, these had little impact on markets at the time, and indeed the drift higher in core FI markets is in contrast to more positive European data. Bund futures are around 70 ticks above Friday's close - but there is little new news in this session driving the move, and there was little movement in either Bund or Treasury futures in the Asian session at all.
- As we noted in the FOREX bullet, the focus for the duration of the Monday session turns to US hours, with the Senior Loan Officer Survey due as well as appearances from Simkus, Villeroy, Vujcic, Muller, Vasle, Nagel, Panetta of the ECB, as well as Fed's Barkin and Williams.
OPTIONS: Larger FX Option Pipeline
May-06 10:21
- EUR/USD: May07 $1.0685-05(E1.2bln), $1.0722-25(E1.1bln); May09 $1.0760-80(E2.8bln), $1.0795-00(E1.3bln), $1.0820-30(E2.1bln)
- USD/JPY: May09 Y152.00($1.2bln), Y153.00-20($1.1bln)
- AUD/USD: May07 $0.6500(A$1.4bln); May09 $0.6530-50(A$2.6bln)
- USD/CAD: May07 C$1.3700($1.1bln), C$1.3875($1.1bln), C$1.3900($1.1bln)
LOOK AHEAD: Monday Data Calendar: SLOOS, Fed Speak, Tsy Bill Auctions
May-06 10:21
- US Data/Speaker Calendar (prior, estimate)
- May-6 1130 US Tsy $70B 13W, $70B 26W Bill auctions
- May-6 1250 Richmond Fed Barkin economic outlook, text, Q&A
- May-6 1300 NY Fed Williams fireside chat, no text, Q&A
- May-6 1400 SLOOS: Sr Loan Officer Opinion Survey on Bank Lending Practices
