Nasdaq hits all-time peak as Nvidia pops higher

Headlines

* Dollar initially dips but finishes marginally in the green

* Nasdaq rises to record close as Nvidia shares jump nearly 7%

* GBP/USD pops up to 1.28 before paring gains

* Gold gains 0even as US Treasury bond yields surge

FX: USD recovered early losses as Treasury yields jumped north. The 10-year yield surged through 4.50% to close at 4.54%. Consumer confidence rose unexpectedly while Fedspeak continued to say that the Fed should take its time before easing policy.

EUR hit a high at 1.0889 before pulling back to close marginally higher. An ECB report showed a drop in April inflation expectations. This dovish signal contrasted with expected hawkish comments from ECB member Holzmann. He said he won’t automatically support more rate cuts after June.

GBP hit a nine-week high at 1.28 before retracing and finishing in the red. This year’s top is at 1.2894. BoE rate expectations have been slashed since the recent CPI data. Markets now see June as a non-event, with August 50:50 from a near certain rate reduction.  

USD/JPY could be about to break sharply higher after a period of sideways trading. The upside breakout in the 10-year Treasury yield could push the major towards 158. Of course, that is “yentervention” territory.

AUD moved up to 0.6679 before closing below 0.6650. Australia CPI is in focus. USD/CAD found support at 1.3623, a major Fib level of the Q4 sell-off.  

US Stocks: Indices closed mixed as the Nasdaq Composite closed above 17,000 for the first time. The S&P 500 finished marginally in the green, up 0.02% at 5,306. The Nasdaq 100 outperformed, settling 0.32% higher at 18,869. In contrast, the Dow closed down 0.55% at 38,852. Tech led the gainers while industrials and healthcare posted the biggest declines. Nvidia stock jumped 6.98% to astonishing all-time highs at $1,139. The giant chipmaker reported last week that demand for generative AI drove record data-centre revenues.

Asian Stocks: APAC futures are mixed. Asian stocks were also mixed with a muted Wall Street handover. The ASX 200 traded in a narrow range with the mood not helped by soft retail sales. The Nikkei 225 struggled at 39k with firmer PPI services figures in focus. They accelerated at the fastest pace since 2015. China stocks were mixed with the Hang Seng outperforming on oil major strength.

Gold edged higher for a third straight day making back some of last Thursday’s losses. But yields popped higher so gains may get harder to come by in the near term.

Day Ahead – Australia CPI

Weighted CPI for April is seen ticking one-tenth lower to 3.4% y/y from 3.5%. Last month’s release beat forecasts at 3.5% against expectations of 3.2%. The strength was due to a big rebound in electricity prices following the ending of various government rebates. For this release, risks lie to the upside with uncertainty over electricity prices, plus there are seasonal factors.

Regarding the RBA and rates, the most recent meeting minutes stated that it considered whether to raise rates, with the bank agreeing it was difficult to either rule in or rule out future changes. It added that the flow of data had increased risks of inflation staying above target for longer. This leaves the RBA still relatively hawkish among major central banks.

Chart of the Day – AUD/USD trying to regain bullish momentum

Some measures of core CPI are still above 4.0%. That means the RBA has little reason to turn even slightly more dovish at this stage. Indeed, there are still some risks that the bank will have to hike rates again if inflation proves stickier than expected. Money markets do not price in any easing by the policymakers before December.

But the chance of another hike should underpin support for AUD. That said, the major could stay under some pressure as US data still proves slow to turn lower. Strong resistance sits around 0.67. Initial support is the 50% mark of the December high and April low at 0.6616.

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