European Summary and Highlights 05 June

European morning session

USD/JPY gained around half a figure through the European morning, continuing the overnight JPY decline as Tuesday’s strong JPY gains were reversed as risk sentiment recovered. USD/JPY reached a high of 156.30, but there was little movement elsewhere. AUD/USD lost around 10 pips to 0.6650 and USD/CAD gained around 10 pips to 1.3685, but EUR/USD and GBP/USD were little changed. EUR/CHF gained around 10 pips to 0.9705.

There wasn’t much news of note. Final services and composite PMIs from the Eurozone showed a small downward revision, while the UK version saw a small upward revision. Eurozone PPI came in weaker than expected in April at -1.0% m/m, -5.7% y/y, but nine of this had market impact.

Asia session

After a disappointing March wage data, the April Labor Cash Earning is seeing a growth of more than 2% after historic negotiation results and would be loved by the BoJ to support their next step in entering positive rates. Ueda has mentioned in previous interviews that a 2% wage growth would feed enough into trend inflation to achieve BoJ's inflation target. If we continue to see above 2% wage hikes, there would be a higher chance for the BoJ to hike rates. U.S. Treasury Yields are higher across the curve while 10yr JGB  yields fell below 1%. USD/JPY is trading 0.37% higher at 155.41.

As previewed from Tuesday's slate of Australian economic release, the Q1 GDP has missed by 0.1% q/q. While it is a soft release, few has been expecting any RBA hikes and thus the market impact is muted. On the other hand, Chinese CAIXIN Service PMI beats estimates after a disappointing manufacturing PMI. Regional sentiment is mixed while U.S. major equity indexes are in the green. AUD/USD is trading 0.14% higher at 0.6659, NZD/USD is also 0.11% higher at 0.6184 while USD/CAD is unchanged at 1.3675. Else, EUR/USD is unchanged and GBP/USD up 0.02%.