Europe Summary and Highlights 13 May

European morning session

The USD was generally fairly steady through the European morning, with EUR/USD and USD/JPY not much changed. GBP was a little firmer, with EUR/GBP losing around 10 pips to 0.8405. The decline came well after the UK labour market data, which was mixed, with earnings growth a little stronger than expected but employment growth somewhat weaker. USD/CAD was a little firmer, rising 20 pips to 1.3985, while EUR/SEK fell back 5 figures to 10.84.

Other than the UK labour market data there was the German ZEW survey which showed a recovery in the sentiment index in May after the sharp dip in April, but remained well below the March high, while the current conditions index held at low levels. BoE chief economist Pill struck a hawkish note saying interest rates may have to stay higher than the market expects, but this was no surprise as he voted against the latest rate cut.

Asian session

After the euphoric Monday, headlines quiet down on Tuesday. We have remarks from BoJ's Uchida and FM Kato but there isn't anything of substance as they are also uncertain with the future development. However, market participants seems to be intrigued by Japan FM Kato's comment that he want to discuss FX with Bessent and speculates potential collaboration.  USD/JPY has retraced partial Monday gains and is trading 0.47% lower at 147.75 with JGB outperform U.S. Treasury yields.

The PBoC has set the onshore reference rate to be stronger than expected, at a level last seen in April 7. It was seen as a sign that trade tension is easing. Equities are mostly reversing Monday's gains partially with Chinese equities hang on to the green. Except Japanese equities, major equity indexes are off session high with U.S. major equity indexes treading into the red. AUD/USD benefited from the proxy support and softer USD to trade 0.62% higher at 0.6412, NZD/USD is up 0.63% to 0.5891 while USD/CAD slides 0.04%. Else, EUR/USD is up 0.29% and GBP/USD is up 0.2%.