North American Summary and Highlights 22 May
Overview - The USD was supported by comments from Fed’s Waller and higher Michigan CSI inflation expectations but ended little changed.
North American session
The USD advanced early supported by hawkish comments from Fed’s Waller, who called for the easing bias to be removed and expressed concern over inflation expectations, just as final May Michigan CSI data saw a sharp upward revision to inflation expectations, the 5-10 year view to 3.9% from 3.4% and the 1 year view to 4.8% from 4.5%. This outweighed a downward revision on the composite to a record low 44.8 from 48.2. However by the end of the session the USD was little changed, news of Qatari diplomats travelling to Iran raising hopes for weekend progress in the Middle East.
USD/JPY found support above 159 but EUR/USD was unable to sustain a move below 1.16 leaving EUR/JPY slightly firmer, though EUR/GBP at .8635 and EUR/CHF at .9110 were slightly weaker. AUD/USD largely erased earlier losses but USD/CAD was marginally higher.
European session
Europe saw very little FX movement over the morning session. EUR/USD and AUD/USD were both a tad lower, but otherwise the USD was little changed against the majors. The CHF and NOK both made ground against the EUR, with EUR/CHF down 15 pips to 0.9120 and EUR/NOK down 3 figures to 10.72, though without an obvious trigger for either move.
UK data was on the weak side, with retail sales down 1.3% m/m in April, but the core was less weak at -0.4%. The public sector borrowing requirement for April was higher than expected at £24.3bn. However, GBP recovered from a small initial dip after the data and finished slightly higher against the EUR.
The German May IFO survey was slightly stronger than expected, but still weak after the dip in April, and the French INSEE survey was also slightly stronger than expected, likely reflecting the manufacturing solidity seen in the PMIs yesterday, despite the weakness in the service sector. But the EUR was little affected.