Market Overview

Markets in Risk On mode ahead of the G7 meeting tomorrow

While the “Risk On” rally continues in global stocks the Chinese markets are lagging behind over fears of trade tensions and high levels of maturing debt. In stark contrast US markets were higher adding to the gains made in the Asian session over the last four days. European markets are trying to make up lost ground but progress is slow compared to global counterparts. Oil has stabilised this week after its fall from $72.80 and is encamped at the $65.00 level. The USD is softer against most other currencies bar the AUD with the pair down -0.09% to 0.76604. Tomorrow the G7 meeting will begin which are set to dominate headlines into the weekend.

US Nonfarm Productivity (Q1) came in at 0.4% against an expected 0.6% from 0.7% previously, showing efficiency slipping and ultimately upward pressure on inflation. Unit Labour Costs (Q1) were 2.9% against an expected 2.8% from 2.7% prior, showing what has become a seasonal increase expected in this metric but these cost can be passed onto consumers. There is growing evidence, albeit anecdotal that labour costs are increasing as workers are becoming harder to find. Trade Balance (Apr) was $-46.2B versus an expected $-49.0B against a previous $-49.0B which was revised up to $-47.2B, rebounding off the low levels, at -57.6%, not previously seen since 2008. EURUSD fell from 1.17793 to 1.17614 following this data release.

Canadian International Merchandise Trade (Apr) was $-1.90B versus an expected $-3.40B against $-4.14B previously which was revised up to $-3.93B. This fell to match the low of November 2016 last month and it is now off the lows, but still at very low levels. USDCAD fell from 1.29090 to 1.28577 following this data release. Ivey Purchasing Managers Index s.a. (May) was 62.5 against an expected 69.7 from a previous 71.5. Ivey Purchasing Managers Index (May) was 69.5 against 70.4 previously. The data came in under last month’s reading which was the highest since 2011 and greatly exceeded expectations. This data is showing robust growth, continuing one of the longest positive runs with over 20 months above 50.0 and is now back into the previous range. USDCAD moved higher from 1.28615 to close the session at 1.29615 after the data release.

EURUSD is up 0.27% overnight, trading around 1.18047. USDJPY is down -0.21% in the early session, trading at around 109.946 GBPUSD is up 0.18% this morning trading around 1.34345. Gold is up 0.03% in early morning trading at around $1,296.88 WTI is down -0.22% this morning, trading around $65.17

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