European Summary and Highlights 18 July

European morning session

The USD was modestly stronger through the European morning, recovering some of the losses against the JPY seen overnight, with USD/JPY bouncing around 40 pips to 156.45. EUR/USD fell more modestly to 1.0930, while GBP/USD slipped back 20 pips to 1.2990.

The main news of the morning was UK labour market data, which was broadly in line with expectations. UK average earnings growth in the 3 months to May was 5.7% as expected, although the May data itself as weaker at 5.1%. The more up to date HMRC data showed a big drop in the y/y rate in June to 3.2% y/y, but most of this was due to a base effect although the monthly data was also slightly soft at -0.4% m/m. The employment data was a bit stronger than expected, with the May payroll numbers from the HMRC revised up to 51k from -3k. GBP was slightly weaker after the data, with EUR/GBP rising 10 pips to 0.8415.

Asia session

USD/JPY slumped in early Tokyo hours by almost a figure. It does not look like an intervention, rather a break of stops accelerated move. The June trade data has come in weaker than estimated, the headline figure is positive on slower import growth. And it would build a difficult case for the BoJ if consumption continue to stay low even when real wage turns positive. USD/JPY is trading 0.13% higher at 156.35 after testing a session low of 155.37 with both the U.S. Treasury and JGB yields higher.

Another strong labor report for Australia in June, employment change came in stronger at 50.2k while unemployment rate ticked up 4.1% but participation rate also rose to 66.9%. This continues to point towards a solid employment market in Australia and reinforces RBA's latest view in pushing back any early easing speculation. AUD/USD is trading 0.11% higher at 0.6737, NZD/USD dropped 0.12% to 0.6075 while USD/CAD slipped 0.03% on stronger oil. Else, EUR/USD is down 0.03% and GBP/USD is unchanged.