European Summary and Highlights 29 May
The USD was not much changed through the European morning, falling back after a brief rise against the EUR following the German state CPI data.
European morning session
The USD was not much changed through the European morning, falling back after a brief rise against the EUR following the German state CPI data. EUR/USD dipped 20 pips to a low below 1.0830 but bounced back above 1.0850 by the end of the morning. The German state CPI numbers were seen by some as being on the soft side of consensus, but look to us to be essentially in line with the expectation of a 0.2% rise in the y/y rate for national CPI. Eurozone money and credit data was also released, which was marginally on the soft side of expectations with loan to households rising 0.2% m/m, but were of little significance. Earlier, German Gfk consumer confidence data for June rose once again to the highest in more than 2 years.
Otherwise, FX was fairly quiet. Although USD/JPY did see a brief spike lower to 156.90 after opening around 157.25, the decline was short lived and USD/JPY finished the session back up at 157.15. NOK/SEK gained around 30 pips to 1.0090, with EUR/NOK lower and EUR/SEK higher.
Asia session
The Australian April monthly CPI has come in higher than expected at 3.6% y/y. While it is not as comprehensive as the quarterly CPI, it is likely the q2 CPI will likely come in higher than expected and further delay the pace of rate cuts. The level of inflation is still moderating towards RBA's target range of 3% and we are not forecasting the RBA to restart tightening for a small bump. More provinces in China are rolling out support policy for the property sector and continue to encourage the Chinese equity market. AUD/USD is trading unchanged as the aforementioned supportive factors are cancelled by broad USD strength, NZD/USD slipped 0.18% to 0.6130 while USD/CAD rose 0.13% to 1.3663 as oil slips ten cents.
USD/JPY breaks 157 on Monday and is trading 0.06% higher at 157.24 on Tuesday's Asia session. Even though we are not hearing any verbal intervention from Suzuki, one can always feel the cautious tone in the market as we approach the intervention zone. However, given the current pace of USD/JPY advancement, it seems actual intervention will occur at higher level rather than being imminent. 10yr JGB yields continue to march higher while U.S. Treasury Yields perform individually. Else, EUR/USD is trading 0.08% lower and GBP/USD down 0.07%.