North American Summary and Highlights 29 May
Overview - The USD slipped on the possibility of Trump agreeing to a MoU with Iran, though uncertainty over what this would mean for the Strait of Hormuz kept the move moderate.
North American session
After some subdued early trade the USD dipped as Trump says holding a Special Situation Room meeting with aides to make the final determination on moving forward with the 60 day MoU deal. However subsequent comments from Trump and Iran suggested key details such as the Strait of Hormuz might not be very clear in the MoU, and that saw the USD off its lows, if still down on the day.
USD/JPY slipped to 159.20 from 159.35 before recovering to 159.30. EUR/USD bounced from 1,1645 to 1.1680 before slipping to 1.1665. EUR/JPY was firmer at 185.80 from 185.50. EUR/GBP reversed a European bounce and EUR/CHF was softer near .91.
The most significant data release was a 0.1% annualized decline in Canadian GDP, well below market and BoC expectations for a 1.5% rise. USD/CAD bounced to 1.3820 from 1.38 on the data but later slipped back below 1.38. AUD/CAD was former at .991 from .989 as AUD/USD picked up to .7185 from .7165. AUD/NZD stabilized near 1.20.
April’s advance US goods trade deficit of $82.4bn was down from $85.3bn in March and narrower than expected, while gains of 0.5% and 0.7% respectively in advance wholesale and retail inventories were seen. Fed’s Bowman was dovish, Paulson balanced and Schmid hawkish, but market focus was elsewhere.
European session
Markets marking time to see if the final hurdles are cleared regarding a MoU, oil sitting at the lows (front months - ¾% to -1%). Dollar pairs largely contained, EUR/USD so far respecting the circa 1.1650ish highs and more generally sitting in the 1.16-1.165 or so range and expiry zone that has been dominating for a couple of weeks.
Kiwi remains the standout performer of the day and week, AUD/NZD - ½ % on the day and back as low as 1.1985, and NZD/USD trending back towards the range highs near 0.6~.
GBP drifting off, though mainly as EUR/GBP continues its recent chart driven range bounce action. BoE's Bailey though does come across relatively dovish with comments that suggest no hurry to raise rates: higher inflation expectations not coming through in wage settlements, allowing inflation to temporarily run above target appropriate (albeit tolerance would weaken if second round effects emerge).
Eurozone data a little mixed but overall comes in bond supportive mainly thanks to the lower than expected German state CPI, generally pointing to a deceleration of around 0.3pp on the year for the national figure later. France Q1 GDP also revised down to -0.1% in Q1 from flat. France prelim HICPI 2.8% from 2.5%, highest since Feb24, but below mkt 2.9%. On the flip side, Italian HICP 0.4% m/m 3.3% y/y vs 3.2% mkt and highest since Sep 2023. German unemployment also comes in better than expected at -12k vs mkt +10k with the rate down to 6.3% from 6.4%. Italy unemployment also lower than expected at 5.1% vs mkt 5.3%.