North American Summary and Highlights 1 June
Overview - The USD was stronger as Iran signaled it would cease negotiations with the US in protest at Israeli actions in Lebanon.
North American session
The USD and oil bounced as Iran signaled it was withdrawing from negotiations with the US in protest against Israeli actions in Lebanon. There was some move off the highs after Trump stated that Israel would not to send troops into Lebanon’s capital Beirut, and that Israel and Iran’s ally Hezbollah would not attack each other, though he also suggested he saw no urgency in talking to Iran.
USD/JPY bounced to 159.70 from 159.45 with very little correction. EUR/USD after slipping to 1.1610 from a.1650 recovered above 1.1630 seeing losses in EUR/JPY erased. EUR/GBP was softer near .8640 but EUR/CHF stronger near .9150. Losses in AUD/USD and AUD/CAD were largely erased. USD/CAD saw limited movement, but was marginally stronger. Equities were supported by tech.
May’s US ISM manufacturing index of 54.0 from 52.7 could be seen as USD supportive, as was a slightly stronger than expected 0.4% rise in April construction spending, but focus was elsewhere.
European session
Oil prices +3-3.5% as Friday’s Trump meeting fails to deliver and tensions persist (further military exchanges; Israel strikes and expanded ground operations ordered in Lebanon - cited by Iran as among factors delaying the diplomatic process).
Leaking now slightly into FX, trapped in consolidation by the wait (EUR/USD still stuck at 1.1650~), but dollar getting a bit of support back through on the likes of SEK and NZD as hopes for something imminent ebb. NZD/USD also turned back from near 0.6~ range highs after last week’s big adjustment run, also arresting AUD/NZD after shakeout.
Eurozone final May manufacturing PMI 51.6 from 52.2, but slightly above expectations at 51.4. Prices charges at 3 ½ year highs. EZ M3 down to 2.7% vs mkt 3.2% and the latest ECB survey has 1yr inflation expectations steady at 4.0%, 3yr easing to 2.9% from 3.0% and 5yr unchanged at 2.4%. Consumers are pessimistic on the 1yr growth (-2.2%) and income expectations. ECB’s Pereira says need to act sooner rather than later on inflation, to avoid a greater second-round impact. In the UK, Nationwide house prices cool, with a 0.6%m/m drop taking the yr/yr rate back to 1.7% from 3%.