Employment Data Boosts Aussie And Kiwi

Employment data and strong risk appetite gave the Aussie and Kiwi a strong boost. Australian job data continued it's one good month/one bad month pattern, showing 50.1k growth in April versus expectation of 11.5k. March data was revised slightly up from -36.1k to -31.1k. Unemployment rate also dropped back to 5.5%. New Zealand data indicated that employment grew 1.7% qoq in Q1 versus expectation of 1.1%, while the unemployment rate dropped sharply from 6.8% to 6.2%. The AUD/USD recovered strongly from the post RBA cut low of 1.0154, and is back trading at 1.0245. Meanwhile, the NZD/USD also jumped back from yesterday's low of 0.8360, and is back at 0.8450 at the time of writing. Both are showing sign of near term bottoming.

In the U.S., the DOW rose for another day to a new record of 15105, while S&P 500 also soared to new record of 1632.7. Fed economists Fernando Duarte and Carlo Rosa wrote in a paper published yesterday that investors will "enjoy historically high excess returns for the S&P 500 for the next five years." The paper noted that "equity risk premium is high mainly due to exceptionally low Treasury yields at all foreseeable horizons."

In Europe, ECB executive member Yves Mersch stated that the central bank "have tools" and it is "not a toothless tiger". While pledging that the central bank would ease further should conditions warrant, Mersch said he was skeptical about direct asset purchases to ease SME funding strains. He reiterated that the ECB will not "subsidize" or "overtake" markets as these are not the task of monetary policy.

In China, the CPI accelerated to 2.4% yoy in April, up from the March 2.1% yoy, beating expectations of 2.3% yoy. PPI, on the other hand, dropped more than expected to 2.6% yoy, down from -1.9% yoy and compared to consensus of -2.2% yoy. Economists believed that the figures are still relative moderate and wouldn't change the government's plan in boosting investments and consumptions. Nonetheless, as the government is expecting acceleration in investment in the coming months, PBoC is unlikely to have further monetary easing.

U.K. events will be the major data focus for today. The BoE is expected to keep rates unchanged at 0.50%, and asset purchase target at GBP 375b. Generally, the stronger than expected Q1 GDP and April PMI data suggested that the central bank could wait and see before making another move. The U.K. will also release industrial production and manufacturing production, and the NEISR GDP estimate today. Other data featured: U.S. jobless claims, wholesale inventories and Canadian housing price index.