Intraday Market Thoughts

US Bulls Pounce on Good News

by Adam Button
May 19, 2015 22:33

US housing starts aren't normally the kind of economic indicator that sparks a massive market move but it did on Tuesday and that reveals a market hungry for good US economic news. The dollar was easily the top performer while the euro lagged. The RBA's Lowe speaks later along with skilled vacancies and the second reading on Japanese GDP.  In today's Premium Insights, we issued a GBPJPY trade and revised the existing EURUSD trade with new rationale and charts. The previous EURUSD long was stopped out. GBPUSD remains in progress.

US housing starts were at a 1.135m pace in April compared to 1.060m expected in the best report in seven years. The reaction was immediate with the US dollar jumping 30-40 pips across the board and it continued to rally through US trading.

The start of this week has been one of the best two-day periods for the dollar since the start of the year. It was aided by incompetent managers at the ECB allowing a market-moving speech in private that publicly revealed 10 hours later. In it, the ECB's Coeure said bond purchases could be accelerated in the next two months and then pared back due to low July/August liquidity. EUR/USD tumbled as low as 1.1117.

The Canadian dollar was down for a second day as oil prices fell more than 3%. Poloz didn't have any surprises and generally retained his rosy outlook for later this year.

The positive US momentum may continue if the FOMC minutes retain an relatively upbeat outlook but the critical releases for the US dollar are on Friday with CPI, durable goods and a speech from Yellen.

In the shorter term, the focus shifts to a speech from the RBA's Lowe at 2315 GMT. The RBA has probably communicated all it intends to and is comfortable on the sidelines for now. At 2350 GMT, Japan releases preliminary GDP for Q2 and a slight improvement to 1.6% from 1.5% is expected. Later reports on Australian consumer confidence and skilled vacancies are unlikely to move AUD.

Act Exp Prev GMT
Fed's Evans Speech
May 20 7:00
GDP Annualized (Q1) [P]
1.5% 1.5% May 19 23:50
GDP (Q1) (q/q) [P]
0.4% 0.4% May 19 23:50
GDP Deflator (Q1) (y/y) [P]
3.6% 2.4% May 19 23:50
Eurozone CPI (APR) (m/m)
0.2% 0.2% 1.1% May 19 9:00
Eurozone CPI - Core (APR) (y/y) [F]
0.6% 0.6% 0.6% May 19 9:00
Eurozone CPI (APR) (y/y) [F]
0.0% 0.0% 0.0% May 19 9:00
Housing Starts (APR)
1135K 1015K 944K May 19 12:30
Housing Starts (APR) (m/m)
20.2% 9.6% 4.9% May 19 12:30
FOMC Minutes
May 20 18:00

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