Europe Summary and Highlights 11 May
Overnight moves faded as oil bounce trims, dollar back to pretty flat
European morning session
A rather tepid European morning, with the market largely fading the overnight moves seen after Trump’s comments at the weekend. Oil trimmed back gains to around $2 from the $4-5 initial move. At the moment, the market is having to deal with very little signal to noise when it comes to Iran news and comments and so left reluctant to follow through on any initial reactions while waiting for the next headline. As a result, the dollar trimming back the initial markup to reasonably flat across the board and volatility remains somewhat, artificially, compressed at present.
In terms of data, Norway CPI was largely as expected with core CPI at 3.2% from 3%, in line with market and Norge Bank expectations. EUR/NOK initially tested the circa 10.8 area base on the back of the oil bounce initially, before similarly moving back to fairly flat after holding again and as oil trimmed.
ECB Governing Council Member Martin Kocher suggests that "if the situation does not improve significantly, there will be no avoiding an interest rate move in the near future" and that "what's clear is that if the war drags on and energy prices remain high, the risk of second-round effects will increase".
Yields up a touch on the oil move and gilts slightly underperforming, 10s back to looking at 5% after the recent correction, as the market waits to see how the potential challenge to Starmer’s leadership plays out. Though not much action on GBP.
USD/CNH inches another 3year low meanwhile ahead of Trump’s China trade talks and summit, and after firmer data over the weekend and Monday (exports and PPI beating market expectations).
Asia session
Headlines over the weekend are mostly pessimistic as we see Iranian proposal being "unacceptable" for Trump. The huge gap between U.S. and Iran does not seem to have narrowed. Both Brent and WTI are up close to 5 USD/b with major equity indexes performing individually but off session low. AUD/USD is trading 0.22% lower at 0.7231 after opening lower at 0.7223. NZD/USD is trading 0.36% lower while USD/CAD rises 0.11%.
With no progress over the weekend in the geopolitical front, USD is once again receiving haven bids and see USD/JPY rally again. However, the threat of intervention has kept speculators on check. So far, we are only seeing one/two figure rebound from post intervention low, suggesting speculators are careful. USD/JPY is trading 0.29% higher at 157.10 after opening more than 10 pips lower than Friday's close. Else, EUR/USD is down 0.27% and GBP/USD is down 0.34%.