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NZ Dollar Climbs Amid Rising Risk Appetite On Trade Deal Hopes





The New Zealand dollar strengthened against its major counterparts in the Asian session on Monday amid rising risk appetite, as investors welcomed progress in trade talks between U.S. and China, after U.S. Treasury Secretary Steven Mnuchin said that trade deal would go "way beyond" previous efforts to open China's markets to U.S. companies.


Speaking on the sidelines of the spring meetings of the World Bank and International Monetary Fund this weekend, Mnuchin said that U.S-China trade talks are "close to the final round of concluding issues".


Mnuchin said that the two sides have consented that "the enforcement mechanism works in both directions."


Data from BusinessNZ showed that New Zealand services sector continued to expand in March, albeit at a slower rate, with a Performance of Services Index score of 52.9.


That's down from 53.6 in February, and it marks the lowest index score since 2012.


The kiwi advanced to an 11-day high of 0.6783 against the greenback, from a low of 0.6760 seen at 5:00 pm ET. The next possible resistance for the kiwi is seen around the 0.69 level.


The kiwi that closed last week's trading at 75.72 against the yen firmed to a 2-week high of 75.96. The kiwi is poised to find resistance around the 77.00 level.


The kiwi appreciated to a 4-day high of 1.6677 against the euro, compared to 1.6700 hit late New York Friday. If the kiwi rises further, 1.64 is possibly seen as its next resistance level.


The NZ currency edged up to 1.0582 against the aussie, following a low of 1.0614 touched at 5:00 pm ET. The kiwi is seen finding resistance around the 1.04 level.


Looking ahead, Swiss producer and import prices for March are due at 2:30 am ET.


Federal Reserve Bank of Chicago President Charles Evans will deliver a speech in a television appearance on CNBC's Squawk Box at 8:30 am ET.


In the New York session, New York Fed's empire manufacturing survey for April and Canada existing home sales for March are slated for release.


At 1:00 pm ET, Evans will speak about the economy and monetary policy at the New York Association for Business Economics luncheon.


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Carry trade is back in fashion





In conditions of low volatility, traders once again resort to the help of a carry-trade strategy. Last week, a Bloomberg currency index that measures carry-trade returns from eight emerging markets has increased for the second week in a row. Such dynamics is recorded for the first time in more than two months. At the same time, expected fluctuations in currencies dropped for a second week, according to a JPMorgan Chase & Co volatility indicator.


The lack of volatility in the foreign exchange markets suggests that investors need evidence to accelerate the growth of the global economy. Only then will they begin to enter long positions in EM-assets. Buyers' confidence in improving the state of the Chinese economy seems to be increasing every day. But the data on Wednesday, most likely, will show that the growth rate of the second largest economy in the world in Q1 stalled to 6.3%.


Investors continue to worry about country risks. In India, Indonesia and South Africa, elections are scheduled, Brazil is still trying to implement pension reforms, and Turkey cannot stop the economic decline and high inflation.


Upcoming events


On Wednesday, Indonesians will decide whether to give the current president, Joko Widodo a mandate for a second five-year term or to choose another leader. The official count may take several days. Last month, the rupee became the best in Asia after the Philippine peso.


In Brazil, traders' attention will be directed to the first congressional vote on the pension reform bill. Any postponement of a political event scheduled for Wednesday will be perceived negatively. Markets will focus on the number of votes that supported the bill. The situation with the speaker of the lower house, Rodrigo Maya, will also be in sight, after local media accused him of bribery.


Senior representatives of the Bank of Korea on Thursday will discuss the possibility of a rate cut later this year after an unexpected slowdown in inflation in March. Market participants are already evaluating potential monetary easing. The yields on 3-year government bonds for the first time since 2016 fell below the rate at the end of March.


China is in focus


Along with the GDP report for Q1, China will publish monthly data on retail sales and industrial production. Investors are waiting for growth rates. In addition, on Wednesday comes the first maturity of the medium-term credit line in the amount of 367.5 billion yuan, or $ 55 billion. According to Chinese analysts, this gives the ideal time to adjust the reserve indicators of banks in case of disappointment with the growth statistics. China's securities should benefit from easing trade tensions with the US.


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This April is going to be idle again for the pound



For the second year in a row, the British currency is missing the once-solid seasonal April rally associated with dividend flows. Blame it on the long-suffering Brexit and the risk of participating in European elections. Earlier for more than a decade, the sterling rose in price against the dollar every April. It was a kind of tradition.


The reasons for the pound's growth at this time of year were simple. Local companies repatriated "home" dividends. Most firms are transnational. Not surprisingly, after receiving dividends abroad, they converted them to pounds. This model was absolutely workable and even withstood a powerful shock in the form of the 2008 crisis.


While the pound rose 0.4% in tandem with the US dollar since the end of March, over the past 13 years to 2017, the average sterling grew by 2.3% in April. Last April, the pound approached the peak after the 2016 Brexit, when a referendum was held before turning down. As a result, the GBPUSD pair ended April with a fall of 1.8%.


London has achieved the extension of the country's exit date from the European Union, market concerns about the chaotic "divorce" process have decreased, but this does not mean that the worst is over. Now investors will have to face political risks, such as the upcoming local elections in the UK, and the Brexit deadlock is only delayed. Alarming moods are likely to return and would put even more pressure on the pound. In late April, the British currency may start a new wave of decline.


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Fasten your seat belts: after a lull in the market, a surge of "turbulence" is expected





Despite the global lull in the Forex market, traders do not seem to relax. The bottom, where JP Morgan's world currency volatility index turned out to be, may portend strong fluctuations in the US dollar exchange rate - this has happened three times in the past 25 years. Some currency strategists warn that they should prepare for a surge in market "turbulence."


In the meantime, in the face of declining volatility of key currencies, investors are forced to search every corner of the market in search of profit.


"The lack of serious movement in developed markets means that currency traders should try their luck in the darker corners of the liquid currencies of developing countries," said Peter Rosensstraich of Swissquote Bank.


"Hedge funds have begun to redefine the weight of emerging markets against the dollar," said Philip Ferreira, senior mixed assets strategist at Lyxor Asset Management.


According to Keith Jax, a Societe Generale specialist, using the yen as a funding currency to buy Indian rupee, Chinese yuan or the Philippine peso could bring substantial profits.


Carry trading also looks attractive in a low volatile environment.


"At the beginning of the year, we opened longs for the USD/ZAR pair, since it managed to rally, which took place in February-March. We received about 6% profit on this jump, and I am very pleased with it, "said Allianz investment manager Casper Brzezniak.


"The pound sterling is trading in an even narrower range than its counterparts, since Brexit was postponed until October, and the volatility of the British currency fell sharply. To make money in these conditions, you need to have time to take advantage of short periods of volatility on the news. This strategy can bear fruit if you choose the right range. Timing is also very important," said Scott Thiel of BlackRock Inc.


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South Korea GDP Slips 0.3% In Q1





South Korea's gross domestic product contracted a seasonally adjusted 0.3 percent on quarter in the first quarter of 2019, the Bank of Korea said in Thursday's advanced estimate.


That follows the 1.0 percent increase in the three months prior.


On an annualized yearly basis, GDP climbed 1.8 percent, slowing from the 2.7 percent increase in the previous three months.


Real gross domestic income picked up 0.2 percent on quarter because of an improvement in terms of trade, the bank said.


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Japan Retail Sales Add 0.2% On Month In March





Retail sales in Japan were up a seasonally adjusted 0.2 percent on month in March, the Ministry of Economy, Trade and Industry said on Friday.


That beat expectations for a flat reading and was down from the 0.4 percent increase in February.


On a yearly basis, retail sales climbed 1.0 percent - also beating forecasts for a gain of 0.8 percent and up from 0.6 percent in the previous month.


Large retailer sales were up an annual 0.6 percent, beating forecasts for a drop of 1.8 percent - which would have been unchanged.


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Finland Consumer Confidence Slows In April


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Finland's consumer confidence slowed in April after rising in the previous month, survey data from Statistics Finland showed on Monday.


The consumer confidence index rose to 15.7 from 16.1 in March. The reading remained above its long-term average of 12.7.


The survey was conducted among 1,143 persons in Finland between April 1 and 17.


Among the four sub-indexes, only consumers' expectations concerning Finland's economy improved slightly in April. Households' personal finance expectations eased, while they were less pessimistic regarding the situation in Finland's economy.


Elsewhere, survey data from the Confederation of Finnish Industries showed that the manufacturing confidence index dropped to -1 in April from 1 in March.


Morale deteriorated in construction, while it improved in services and retail trade.

South Korea Industrial Production Gains 1.4% On Month In March





Industrial output in South Korea climbed a seasonally adjusted 1.4 percent on month in March, Statistics Korea said on Tuesday - rebounding from the 3.4 percent contraction in February.


On a yearly basis, industrial was down 2.8 percent following the 3.4 percent annual slide in the previous month.


The index of all industry production was up 1.1 percent on month and down 0.7 percent on year. In February, the index was down 2.6 percent on month and 1.9 percent on year.


The Manufacturing Production Index increased 1.5 percent on month but fell 2.9 percent on year. The Manufacturing Shipment Index gained 2.5 percent on month but fell 1.5 percent on year. The Manufacturing Inventory Index shed 0.6 percent on month but climbed 4.6 percent on year.


The Production Capacity Index added 0.2 percent on month but fell 0.5 percent on year. The Index of Capacity Utilization Rate climbed 1.4 percent on month but lost 2.5 percent on year.


The Manufacturing Average Capacity Utilization Rate in March marked 71.5 percent, which increased by 1.0 percentage points from the previous month. The Index of Services added 0.2 percent from the previous month and 0.6 percent on year.


The Retail Sales Index jumped 3.3 percent on month and 2.4 percent on year. The Equipment Investment Index jumped 10.0 percent on month but tumbled 15.5 percent on year.


The Domestic Machinery Shipment Index in March dropped 15.2 percent on year. The value of Domestic Machinery Orders Received fell 6.7 percent on year.


The value of construction completed at constant prices increased 8.9 percent on month but lost 2.9 percent on year. The value of construction orders received at current prices surged 18.7 percent on year.


The Composite Coincident Index in March added 0.1 percent from the previous month. The Cyclical Component of Composite Coincident Index, which reflects current economic situations, eased 0.1 points from the previous month.


The Composite Leading Index in March gained 0.2 percent on month. The Cyclical Component of Composite Leading Index, which predicts the turning point in business cycle, eased 0.1 points on month.


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Rising oil prices pose a problem for the global economy - Morgan Stanley





According to analysts of the largest bank Morgan Stanley Wealth Management, the markets underestimate the risks associated with rising oil prices. Investors are careless over this fact, although they should purchase low-cost energy stocks to hedge their portfolios so as not to lose.


At the beginning of this week, the situation on the stock markets developed favorably, which is why investors have lost their vigilance, bank experts say. On Monday, April 29, the S&P 500 index updated its record high. The main catalyst for its growth were US data. By the end of March 2019, consumer spending in America rose substantially, and the base rate of inflation, which the Fed carefully monitors, fell to an annual low. This can affect the decision of the regulator about the interest rate, analysts believe. The positive dynamics of the S&P 500 index suggests that investors are satisfied with oil prices, which is not very good, Morgan Stanley believes.


Experts advise market participants not to rest on their laurels, noting that the current rise in oil prices could be a problem for the global economy. If the cost of oil remains at the current level until the end of this year, the consumer price index may exceed 3%, creating a problem for the Fed. At the same time, the purchasing power of the population will significantly decrease, putting pressure on corporate profits and slowing economic growth in China and in emerging markets, Morgan Stanley believes.


Recall that the prices of Brent and WTI crude oil have recently reached their highest level in the last six months. On Tuesday, April 30, Brent crude rose by 1.10% to $ 72.74 per barrel. According to experts, the price of black gold will remain high or continue to grow, if OPEC and its allies extend the term of the agreement on the restriction of raw materials supply. It is possible that a decision will be taken at the next meeting in June of this year.


In the current situation, bank analysts recommend buying cheap oil stocks to hedge their portfolio, especially if so-called "growth stocks" prevail. These include papers purchased for the cyclical recovery of the economy. This will help lower the risks in the future, according to Morgan Stanley.


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Franc Falls Ahead Of Swiss CPI





At 2:30 am ET Friday, Swiss CPI for April is due. Ahead of the data, the franc dropped against its major counterparts.


The franc was worth 109.28 against the yen, 1.0202 against the greenback, 1.1394 against the euro and 1.3295 against the pound at 2:25 am ET.