North American Summary and Highlights 23 May

North American session

Comments from Trump threatening 50% tariffs on the EU from June 1 and 25% tariffs on imported iPhones alarmed markets though a dip in UST yields was largely reversed and equity losses were modest, with many doubting whether any such tariffs would last long if implemented. EUR/USD slipped from 1.1375 to 1.13 before reversing most of its losses. USD/JPY slipped to 142.50 from 143.40 and was subsequently fairly stable. The USD was weak elsewhere with AUD//USD testing .65, USD/CAD falling a big figure to 1.3720. EUR/GBP saw only marginal losses but EUR/CHF fell to .9330 from .9370. 

March Canadian retail sales rise by 0.8% but fell by 0.7% ex autos. US April new home sales saw a strong 10.9% increase to 743k. Fed’s Goolsbee stated that the bar to move rates was high.  

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.