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Debt Ceiling Optimism Buoys Risk Appetite

Stock markets in the US and Asia rose along with the dollar and crude as talks between the White House and congressional Republicans seemed more constructive.

Chart: XWTI 

Key Factors for Today

• Positive debt ceiling talks lift the dollar, stocks and crude oil


• USD/JPY gains for the 5th consecutive day, approaching the key level of 138.00


• BOE Gov Bailey adds to inflation concerns, helping Cable recover intraday losses


• Australia’s weak job data triggers Aussie dip but found support at $0.6680


• WTI surges nearly 3%, partially due to EIA predicting rising demand

USD/JPY Gains for 5th Session

House Speaker Kevin McCarthy repeated that reaching an agreement on the debt ceiling by Sunday was “doable”, while President Joe Biden said he was confident he will get a deal. USD/JPY marked its 5th consecutive day of gains, adding 0.95% shy of 137.65, shifting the focus to 138.00 next.

Cable Recovers Intraday Losses

BOE Governor Andrew Bailey spoke before the British Chamber of Commerce, insisting the MPC will “adjust” rates as necessary to bring inflation down. He also said the UK is experiencing second-round effects on inflation. Cable had dropped to a 3-week low of $1.2420 but recovered all gains to close mixed at $1.2486.

Australia Jobs Weaker Than Expected

Australia’s April Employment change -4.3K compared to the +25K expected, marking the first decline since January. The unemployment rate also unexpectedly jumped to the highest level since January at 3.7% compared to the 3.5% expected. Aussie traded as low as $0.6628 on Wednesday, with bulls buying the dip for a mixed close at $0.6654. Following the data release, the support was retested and rejected early Thursday, opening the door to $0.6680.

New Zealand PPI Decelerates Dramatically

Q1 annual PPI for New Zealand dropped to 4.7% from 8.0% reported at the end of last year. The government budget was largely as expected, with a $7.0B deficit, but the country no longer expects a recession. Kiwi closed up 0.30% higher but traded at 0.70% on Wednesday to $0.6273.There lies solid support at $0.6225.

WTI 3% Higher, EIA Sees Increasing Demand

The US DOE’s weekly report saw a surprise build in crude inventories of 5M bbls compared to the expected 1M bbl drawdown. However, the report also suggested that demand would outstrip supply by 2M bbl/day in the year’s second half, partially supporting debt-ceiling optimism. WTI rose nearly 3% to $72.60/bbl, with the following significant resistance at $74.75/bbl, so long bulls maintain $70/bbl.

On The Docket

• ECB President Lagarde’s Speech


• Initial Jobless Claims


• Fed Jefferson Speech


• Fed Barr Testimony


• Fed Logan Speech


• Existing Home Sales


• UK Gfk Consumer Confidence


• Japan Inflation Rate

Fx 1-Day Relative Performance (USD)

• Aussie is 0.22% lower, while Kiwi is up by 0.05%


• Euro 0.06% lower, pound down by 0.14%


• Loonie and Franc are 0.16% down


• Japanese yen up by 0.11%


• Gold is 0.16% lower, silver -0.47%


• Crude is down by 0.44%, while Brent is up by 2.19%


• Natural gas is up by 0.51%

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