North American Summary and Highlights 12 May
Overview - The USD made modest gains on Middle East risks but came off its highs in late trade.
North American session
US April CPI was as expected at 0.6%, but with the before rounding gain at 0.64% the yr/yr rate at 3.8% was higher than expected. Core CPI rose by 0.4%, slightly higher than expected but with the before rounding gain being 0.38% the surprise was marginal. Reaction to the data was modest but the USD picked up in the morning before correcting in the afternoon. The Senate confirmed Kevin Warsh as a Fed Governor, setting the stage for a vote to confirm him as Chairman.
Middle East tensions kept oil firm. USD/JPY was little changed but off its high near 157.55 while EUR/USD was little changed but off its lows near 1.1750. EUR/GBP stabilized near .8675 with pressure on PM Starmer persisting. The USD’s afternoon correction saw AUD/USD edge up to .7240. and USD/CAD slip below 1.37.
European session
Heating up a touch in the morning as some recent tension points start to bite a little, albeit with markets generally still within recent bounds. Setting the backdrop, further negative comments from Trump on Iran (garbage, ceasefire on life support) did see oil nudge back above the $100 mark in the morning and, with risk markets softer, a firmer dollar lean if still very checked back within recent bands.
The main action though seen on sterling where an opening gilt spike to test the lows and recent yield highs (10s still up some 11bp) on the back of political worries saw cable test down to 1.35 support before trimming off support, and EUR/GBP bouncing further off the recent 0.86- base (spiking to test 0.87- at the highs before also pulling back). Some 70+ Labour MPs urging him to stand down or give an exit date, amid broader cabinet jostling.
Starmer emerges from cabinet vowing to get on with job, but agitations are not going to go away. Focus turns to the backroom gossip and the event betting market to gauge timings and odds on the favourites (which wing of the party).
German ZEW survey unexpectedly bounces, sentiment -10.2 vs -17.2, though current conditions -77.8 vs -73.7 as expected. Italy industrial production 0.7%m/m sa, 1.5%y/y ca, firmer than consensus.