North American Summary and Highlights 5 March
Overview - The EUR continued to advance. US data was mixed but CAD saw support from a one-month postponement of US auto tariffs on Canada and Mexico.
North American session
EUR/USD extended its European gains to 1.0795, while EUR/GBP advanced to .8370 as GBP/USD tested 1.29. AUD/USD was also firm, near .6340. A one-month postponement of US tariffs on Canadian and Mexican autos saw USD/CAD fall to 1.4340, almost a big figure below the session high.
US ADP employment data was weaker than expected with a 77k increase but the impact of this on the UST market was largely erased by a stronger than expected ISM services index of 53.5. ADP data helped USD/JPY fall to lows below 148.50, with a subsequent correction unable to hold above 149 despite the firmer ISM services data and rally in equities on the auto tariff postponement.
European morning session
EUR/USD extended gains through the European morning session, gaining a big figure to a high of 1.0722 before slipping back below 1.07 by the end of the morning. The EUR benefitted from sharply higher EUR yields in response to the German initiative to remove the debt brake and increase military spending in response to Trump’s disengagement from Europe. The parties hoping to form Germany's next government on Tuesday agreed to create a EUR500 bn infrastructure fund and overhaul borrowing rules to revamp the military. German 10 year yields rose 20bps with 2 year yields up 15bps as markets priced in less ECB easing in response to the increased spending plans.
While the USD was also generally weaker, the EUR also gained on the crosses. USD/JPY fell back 35 pips to 149.35 and AUD/USD gained 20 pips to 0.6285. GBP/USD rose 40 pips to 1.2830, but EUR/GBP was also up 30 pips to 0.8335. EUR/CHF gained 30 pips to 0.9390. Only the scandis kept pace with the EUR. EUR/NOK was steady at 11.80, but the SEK was the best performer on the morning, with EUR/SEK falling 6 figures to 11.02.
Datawise, Swiss CPI was slightly higher than expected at 0.6% y/y in January. The S&P composite PMI indices for the Eurozone and UK were unrevised at 50.2 and 50.5 respectively. Eurozone PPI was higher than expected at 1.8% y/y.