UK Elections dominate ahead of NFP

<p>The entire rise in European sovereign bond yields since the beginning of the year has now been completely wiped out in the space of a […]</p>

The entire rise in European sovereign bond yields since the beginning of the year has now been completely wiped out in the space of a few weeks. The old analogy of ‘sell in May and go away’ for equity markets certainly looks to be in play as bonds prices now reflect a nonexistence QE programme as the dollar tumbles in sympathy for the reflation trade. The FX market is certainly secondary to this move and has seen a huge reduction in positions particularly in EUR/USD which has now moved some 800 points from the lows seen just last month. I’m not going to even justify this move in FX, as for me the fundamental picture doesn’t reflect such position adjustment. I look to the turn in oil and commodity prices along with bond outflows as the main catalysts as FX markets adjust to the reduction in liquidity.

The AUD was again in focus in the Asian session following on from the RBA rate cut and surprise removal of their easing bias in the subsequent statement. The employment change came in at -2.9k versus a consensus forecast of positive 4k as the full time component dropped to -21.9k versus the previous outcome of 31.5k. The dour report has heightened market speculation that tomorrow’s Statement of Monetary policy will play down the removal of the easing bias at Tuesday’s meeting.

It is polling day in the UK at last, with the mathematical possibilities to form a government likely to be known in the early hours of Friday. With sterling in mind, a Labour minority (requiring SNP support) is probably the most positive for GBP as a referendum on EU membership will be off the agenda – although a Conservative- Liberal democrat coalition is perceived more stable despite the risk of a Brexit.



 1.1270-1.1175-1.1060 | Resistance 1.1270-1.-1.1450-1.1535



118.50-117.80-117.50 | Resistance 120.60-121.30-122.00



Support 1.5150-1.5070-1.4855 | Resistance 1.5305-1.5450-1.5530


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