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Swiss Franc Dips, Dollar Range Bound as Fed Hike Awaited

Major forex pairs are generally stuck inside yesterday’s range as markets await FOMC rate decision. Swiss Franc is the exception, though, as the selloff against Euro spreads to other Franc pairs. Dollar and Canadian are the next weaker ones. On the other hand, Aussie and Kiwi are the firmer one while Euro and Sterling are mixed. The picture should easily be changed by post FOMC volatility.

Fed is widely expected to raise federal funds rate by 50bps to 0.75-1.00% today. The plan for balance sheet runoff should be announced too. But the main question is what next. Fed fund futures are currently pricing in 99.1% chance of a 75bps hike in June. Markets would be eager to get some hints from Chair Jerome Powell on such expectations. But then, Powell is unlikely to give anything concrete.

Here are some previews on FOMC:

In Europe, at the time of writing, FTSE is down -0.42%. DAX is down -0.04%. CAC is down -0.57%. Germany 10-year yield is up 0.0216 at 0.993. Earlier in Asia, Hong Kong HSI dropped -1.10%. Singapore Strait Times dropped -0.23%. Japan and China were on holiday.

US ADP jobs grew 247k only, recovery showed signs of slowing

US ADP private employment grew 247k only in April, well below expectation of 370k. By company size, small businesses lost -120k jobs. Medium businesses added 46k jobs. Large businesses added 321k jobs. By sector goods-producing jobs grew 46k. Service-providing jobs grew 202k.

“In April, the labor market recovery showed signs of slowing as the economy approaches full employment,” said Nela Richardson, chief economist, ADP. “While hiring demand remains strong, labor supply shortages caused job gains to soften for both goods producers and services providers. As the labor market tightens, small companies, with fewer than 50 employees, struggle with competition for wages amid increased costs.”

US goods and services trade deficit widened to USD 109.8B in Mar

US goods and services exports rose 5.6% mom to USD 241.7B in March. Imports rose 10.3% mom to USD 351.5B. Trade deficit widened from USD 89.2B to USD 109.8B, larger than expectation of USD 106.6B.

Deficit with China increased USD 7.4B to USD 48.6B. Deficit with Canada increased USD 3.7B to USD 10.3B in March. Deficit with the European Union decreased USD 1.3B to USD 15.6 B.

Eurozone retail sales dropped -0.4% mom in Mar, EU down -0.2% mom

Eurozone retail sales dropped -0.4% mom in March, worse than expectation of -0.2% mom. Volume of retail trade decreased by -2.9% for automotive fuels, and by -1.2% for non-food products, while it increased by 0.8% for food, drinks and tobacco.

Retail sales contracted -0.2% mom in EU. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were registered in Spain (-4.0%), Luxembourg (-3.3%) and France (-1.9%). The highest increases were observed in Slovenia (+11.4%), Latvia (+11.1%), and Hungary (+7.3%).

Eurozone PMI composite finalized at 55.8, surprisingly resilience in face of war

Eurozone PMI Services was finalized at 57.7 in April, up from March’s 55.6, an 8-month high. PMI Composite was finalized at 55.8, up from March’s 54.9, a 7-month high.

Looking at some member states, France PMI composite was finalized at 57.6, a 51-month high. Spain rose to 55.7, 2-month high. Italy rose to 54.5, 4-month high. Germany, however, dropped to 54.3, 3-month low.

Chris Williamson, Chief Business Economist at S&P Global said: “The eurozone economy has shown surprising resilience in the face of the Ukraine-Russia war, thanks to a renewed burst of service sector activity as virus containment measures were relaxed further during April. The survey data are consistent with GDP rising at a quarterly rate of around 0.7% at the start of the second quarter after signalling a 0.4% rise in the first quarter.

NZ unemployment rate unchanged at 3.2%, high wage inflation

New Zealand employment rose 0.1% qoq in Q1, matched expectations. However, total actual weekly hours worked dropped slightly by -0.2%. Unemployment rate was unchanged at 3.2%, slightly above expectation of 3.1%. Participation rate dropped -0.1% to 70.9%.

Labor cost index rose 0.7% qoq, matched expectations. All sectors wage inflation rose 0.8% qoq. Annual rate jumped from 2.6% to 3.0%. “Wage inflation is at its highest level since the March 2009 quarter,” business prices delivery manager Bryan Downes said.

Australia retail sales rose 1.6% mom to new record in Mar

Australia retail sales rose 1.6% mom to new record AUD 33.6B in March, well above expectation of 0.5% mom. Over the 12-month period, sales rose 9.4% yoy.

Director of Quarterly Economy Wide Statistics, Ben James, said the result was up 0.8% on the previous record level set in November 2021. This follows a 1.8% rise in February 2022, a 1.6% rise in January 2022 and a fall of -4.1% in December 2021.

“Rising prices, combined with the continued easing of restrictions across the country has led to rises in turnover in all three months of the March quarter.

EUR/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0265; (P) 1.0290; (R1) 1.0325; More….

EUR/CHF’s rebound from 1.0186 continues today and intraday bias stays on the upside for 1.0369/0400 resistance zone. Firm break there will resume the rebound from 0.9970 to 1.0610 structural resistance. On the downside, below 1.0186 will turn bias back to the downside for 1.0086 support, to extend the corrective pattern from 1.0400.

In the bigger picture, as long as 1.0505 support turned resistance (2020 low) holds, long term down trend from 1.2004 (2018 high) is expected to continue. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. However, firm break of 1.0505 will suggest medium term bottoming, and bring stronger rebound towards 1.1149 structural resistance.

Economic Indicators Update

GMTCcyEventsActualForecastPreviousRevised
22:30AUDAiG Performance of Construction Index Apr55.956.5
22:45NZDEmployment Change Q10.10%0.10%0.10%0.00%
22:45NZDUnemployment Rate Q13.20%3.10%3.20%
22:45NZDLabour Cost Index Q/Q Q10.70%0.70%0.70%
23:01GBPBRC Shop Price Index Y/Y Mar2.70%2.10%
01:30AUDRetail Sales M/M Mar1.60%0.50%1.80%
06:00EURGermany Trade Balance (EUR) Mar3.2B12.3B11.5B
07:45EURItaly Services PMI Apr55.753.952.1
07:50EURFrance Services PMI Apr F58.958.858.8
07:55EURGermany Services PMI Apr F57.657.957.9
08:00EUREurozone Services PMI Apr F57.757.757.7
08:30GBPM4 Money Supply M/M Mar0.10%0.80%1.00%
08:30GBPMortgage Approvals Mar71K70K71K
09:00EUREurozone Retail Sales M/M Mar-0.40%-0.20%0.30%0.40%
12:15USDADP Employment Change Apr247K370K455K479K
12:30CADInternational Merchandise Trade (CAD) Mar2.5B4.0B2.7B3.1B
12:30USDTrade Balance (USD) Mar-109.8B-106.6B-89.2B-89.8B
13:45USDServices PMI Apr F54.754.7
14:00USDISM Services PMI Apr5958.3
14:30USDCrude Oil Inventories-0.7M0.7M
18:00USDFed Interest Rate Decision1.00%0.50%
18:30USDFOMC Press Conference
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