North American Summary and Highlights 7 May
Overview - The USD erased European losses and more in North America as Middle Eastern risk picked up again.
North American session
The USD picked up, particularly in the afternoon, more than fully erasing European losses. A WSJ report that Saudi Arabia and Kuwait had lifted restrictions on US military access to bases and their airspace, and that Trump was looking to restart Project Freedom, raised the risk of renewed conflict. Later Iran reported explosions in Qeshm, an Iranian island near the Strait of Hormuz. USD/JPY rose to 156.70 from 156.35 and EUR/USD fell back to 1.1750 from a 1.1775. EUR/GBP was firmer at .8650 from .8640 and EUR/NOK and EUR/SEK largely erased European losses. EUR/CHF and USD/CAD were little changed but AUD/USD fell to .7225 from .7260.
US data was on balance strong, with initial claims still low at 200k if up from 190k. Q1 non-farm predictivity rose by 0.8%. Unit labor costs were weaker than expected at 2.3% but with non-labor costs up by 8.0% the implicit deflator was firm at 4.7%. March construction spending rose by 0.6% after a 0.2% February decline. Fed’s Daly was on the dovish side, seeing policy as modestly r4estrctive.
European session
The USD was generally a little weaker through the European morning, with EUR/USD gaining around 20 pips to 1.1770, and most other European currencies seeing similar gains. The NOK was the best performer, with EUR/NOK dropping 9 figures to 10.85, erasing most of yesterday’s losses as Norges Bank raised the policy rate to 4.25%. The decision had been seen as a close call ahead of time. The Riksbank left policy unchanged as expected, but the SEK gained a little against the EUR in sympathy with the NOK. The JPY initially gained some ground against the USD as well, but fell back to opening levels by the end of the session.
Datawise, German March industrial orders rose a strong 5% m/m, but the data has been volatile of late and the rise had no market impact. The UK construction PMI for April came in weaker than expected at a 6 month low, but GBP only edged very slightly lower against the EUR.