North American Summary and Highlights 13 May
Overview - The USD was firmer but lost momentum in North America despite a strong US PPI.
North American session
US April PPI was significantly higher than expected, up by 1.4% overall, 1.0% ex food and energy and 0.6% ex food, energy and trade. However the market reaction was modest, with oil slightly lower and traders awaiting the Trump-Xi meeting. USD/JPY was slightly firmer around 157.85 but EUR/USD was broadly stable supported at 1.17. AUD/USD advanced to .7260 from .7240 and with USD/CAD marginally firmer AUD/CAD picked up to .9950 from .9920.
The Senate confirmed Kevin Warsh as Fed Chair and ECB’s Lane said the oil price shock may require rate hikes. The UK political situation remains volatile with reports Health Secretary Wes Streeting is poised to resign and challenge PM Starmer as early as Thursday. EUR/GBP picked up to .8675 but later returned to near .8660.
European session
Amid the current tense environment, albeit continued US risk resilience, the dollar continues to creep higher in the European morning with EUR/USD testing 1.17- support, opening scope down to 1.1670 weekly low if cleared, while DXY is testing the 98.50 mark, above which there's scope to pick up towards 99/99.18.
US-China trade talks are underway today ahead of the US-China summit and Trump Beijing visit Thu-Fri. Trump dismisses suggestions of China help on Iran (‘I don't think we need any help with Iran. We'll win it one way or the other, peacefully or otherwise’)
In the UK, with PM Starmer staring down the revolt, some of the immediacy of the challenge looked to be dissipating. Gilts settled after backfilling some of Tuesday’s gap, while EUR/GBP in a touch and sitting around 0.8650 congestion having rejected the spike test to 0.8695 on Tuesday.
Eurozone March industrial output 0.2% (mkt 0.3%), -2.1%y/y (mkt -1.7%). Flash Q1 GDP 0.1%q/q (mkt 0.1%).