European Summary and Highlights 07 May
A fairly quiet European morning saw a modest dip in EUR/USD early on as German factory orders data showed a weaker than expected 0.4% decline in March.
European morning session
A fairly quiet European morning saw a modest dip in EUR/USD early on as German factory orders data showed a weaker than expected 0.4% decline in March. But EUR/USD only fell around 10 pips and held at 1.0760.
USD/JPY started the session weaker, falling to a low of 154.00 after opening at 154.50, but bounced to 154.60 by the end of the morning. There was a similar trajectory in EUR/CHF, which dipped early on, but recovered to finish the morning a little higher at 0.9770.
Otherwise, the EUR was slightly firmer against the scandis, but there was little news of note. Eurozone retail sales were slightly stronger than expected at 0.8% m/m in March, and UK construction PMI was also stronger than expected in April, reaching its highest in more than a year, but there was no market response.
Asia session
RBA has left cash rate unchanged at 4.35% align with our forecast on Australian inflation dynamics. Despite the slower than expected moderation in CPI, the room for further tightening is small if considering the health Australian economy, even when the RBA leaves the door open to policy changes. There is no big changes in the statement with forward guidance "The path of interest rates that will best ensure that inflation returns to target in a reasonable time frame remains uncertain and the Board is not ruling anything in or out. The Board will rely upon the data and the evolving assessment of risks." is a new set of wordings but not signalling anything new. In the press conference, Bullock suggest further tightening is not ruled out but not of central forecast. AUD/USD slipped by 0.55% to 0.6589. The Australian Q1 Retail sales has come in lower at -0.4% q/q vs. -0.2% expected. It confirms the strength in domestic demand has began to weaken after prolonged period of high rates and depletion of household saving. It should keep the RBA on hold in the coming meeting as the cooler economy and still hot inflation does not allow RBA to change policy rate. NZD/USD is also 0.12 % to 0.6003 while USD/CAD rose 0.17%.
USD/JPY continue its grind higher after market sentiment being affected by the lack of co-ordination in intervention between the U.S. and Japan. Both Hayashi and Kanda said they have no comment towards intervention. JGB yields reopened lower after Monday's Japan holiday. U.S. Treasury yields are also a tad lower for the session. USD/JPY is up 0.44% at 154.54. Else, EUR/USD is down 0.1% and GBP/USD is down 0.2%.