Europe Summary and Highlights 23 May

European morning session

The European morning saw gains for riskier currencies, with European currencies particularly strong. The SEK was the best performer, with USD/SEK falling near 1% to 9.53, but there were good gains for GBP and the EUR as well, with GBP/USD up 50 pips and EUR/USD up 35 pips. AUD/USD also gained near 0.5%, and USD/CAD dropped 20 pips, but USD/JPY and USD/CHF were only marginally lower.

The main news of the morning were the strong UK April retail sales and German Q1 GDP data. UK retail sales rose a much larger than expected 1.3%, and although the March rise was revised down to 0.1%, the underlying trend appears to be accelerating, although the numbers were likely boosted by good weather. German GDP was revised up to 0.4% q/q in Q1 due to strength in March focused on manufacturing and exports. This may have been related to tariff concerns, but the data nevertheless gave a general impression of better European demand, although yields and equities were not much changed.

Asia session

The Japan April National Headline CPI remains elevated at 3.6% y/y, ex fresh food at 3.5% y/y while ex fresh food % energy come in at 3% y/y. The BoJ is stuck now with rising inflationary pressure and U.S.-Japan trade complication, putting them in a difficult spot. It is likely the BoJ will not move until there is more clarity in the trade front. USD/JPY is trading 0.42% lower at 143.39 with the Japanese government seem to be ready to compromise to a certain extent to reach a deal, sparking optimism for a move from the BoJ afterwards. 

Risk sentiment is still choppy on the last trading day of the week. Regional equities are off session high but stays in the green while U.S. major equity indexes have their toes in the red. USD is trading broadly lower against major currencies. AUD/USD is trading 0.4% higher at 0.6436, NZD/USD is also up 0.31% to 0.5916 while USD/CAD slips 0.21%. Else, EUR/USD is up 0.35% and GBP/USD is up 0.25%.