European Summary and Highlights 05July

European morning session

GBP moved slightly higher through the European morning, with EUR/GBP dropping 10 pips to 0.8465 following the confirmation of a victory for the Labour party in the U general election held on Thursday. EUR/USD was very marginally higher at 1.0825, but there was otherwise very little movement in the G10 currencies.

Datawise we saw weak May industrial production data from both Germany and France, falling 2.5% and 2.1% m/m respectively. The German data saw the lowest level of production since the pandemic, following similar weakness in the orders data yesterday. Eurozone retail sales were much as expected, rising 0.1% m/m in May.

Asia session

The UK election exit polls are showing a major victory for Labour and the Conservatives having the fewest seats since the party was founded. Sterling was little changed as the results have been forecast for weeks. While the final results are yet to be released, the change of governing party seems inevitable. GBP/USD is trading 0.08% higher at 1.2769. EUR/USD is up 0.08% also.

Japan May household spending came in lower than expectation of +0.1% to -1.8% y/y. It continues to point towards Japanese consumers unwilling to purchase products at a higher price despite wages picking up. It could weigh on BoJ's pace of monetary policy tightening. We also have the usual jawboning from Suzuki saying weak yen is pushing up import costs. USD/JPY is correcting further and is trading 0.35% lower at 160.64 with U.S. Treasury yields reopened higher and JGB yields slips. Else, AUD/USD is up 0.08% despite the PBoC signed agreements with major banks/institutions to borrow Chinese treasury bonds, which seems to aiming towards a sale of bonds to curb the last strength. NZD/USD and USD/CAD are unchanged.