Europe Summary and Highlights 25 July
The USD gained ground through the European morning, primarily against the JPY, with USD/JPY rising nearly a big figure to 147.85.
European morning session
The USD gained ground through the European morning, primarily against the JPY, with USD/JPY rising nearly a big figure to 147.85. The move may have been triggered by rumours that PM Ishiba will resign or be forced out after the LDP lost control of the Upper House in last weekend’s election.
The USD was also firmer elsewhere, with GBP also under pressure. GBP.USD lost 40 pips to 1.3460 and EUR/GBP gained 20 pips to 0.8720 after UK June retail sales rose a lower than expected 0.9% m/m, following a 2.8% decline in May. EUR/USD only lost 10 pips to 1.1735, but AUD/USD was 20 pips lower at 0.6560.
Datawise, the German IFO survey was slightly weaker than expected in July, but the business climate index was nevertheless marginally higher than in June. Eurozone M3 growth was weaker than expected at 3.3% y/y, but y/y loan growth was up on the month, both to households and businesses.
Asia session
Thailand has evacuated more than 100,000 residents from areas near its border with Cambodia and prompted the United Nations Security Council to call an emergency meeting at 3 p.m. ET on Friday. It is the deadliest clash between the countries in decade as current death is reported to be above 144. So far we are seeing limited reaction from the market as there is little sign of further escalation that will trigger a chain reaction in the region. USD/JPY is trading 0.08% higher at 147.11. For July Tokyo CPI all y/y measures remain elevated with ex fresh food at 2.9% and ex fresh food & energy at 3.1%. While it does implicate a certain level of moderation, the inflationary pressure is above BoJ's target of 2%. With trade uncertainty fading into the backdrop, BoJ's hands could be untied. Yet, the forward guidance in the July meeting is unlikely to change along the inflation forecast revision.
The broader risk mood is individual on Friday as we see U.S. major equity indexes having minor gains while regional equities dip, led by more than one percent losses for HSI. There has not been many headlines crossing the wire, thus sentiment may only be affected by regional conflict in Thailand and Cambodia. AUD/USD is trading 0.21% lower at 0.6576, NZ/USD is trading 0.02% lower at 0.6026 while USD/CAD rises 0.13%. Else, EUR/USD is down 0.03% and GBP/USD is down 0.09%.