Europe Summary and Highlights 19 May
Soft UK labour market data, gilt yields trim. GBP consolidates yesterday's position trimming bounce
Dollar remains propped amid uncertain backdrop, USD/JPY creeping higher into intervention zone
European morning session
Still a very nervy market following a period of noisy and erratic Iran commentary. That, and an equally uncertain risk tone after recent heated tech gains propped (next focus here Nvidia earnings), tending to keep the dollar propped.
Most pairs sitting within their recent consolidative areas, if proving heavy into bounces at present: EUR/USD sitting off 1.16- support, AUD/USD just off 0.71- support, while USD/JPY continues its slow creep back towards intervention areas, with a high so far of 159.17. Japan FinMin Satsuki Katayama at G7 repeats that ready to act appropriately against excessive currency volatility.
The UK saw soft labour market data reinforced the need for BoE caution, with notable weakness in vacancies and the (albeit noisy and subject to revision) payrolls data at -100k, weakest since pandemic. Unemployment back to 5% in the 3mths to March, and while average earnings was slightly above expectations at 4.1% from 3.9%, regular pay dropped to 3.4% from 3.6% ex-bonus in line with expectations.
EUR/GBP consolidates its correction seen yesterday on the reports that Burnham would not overhaul the fiscal rules – still very much mid ground within the wider 2026 range - while gilt yields -3/4bp across the curve, following yesterday’s relief/position trimming move.
Asia Session
Japan Q1 GDP beats estimate at 2.1% annualized. While it is supportive with private consumption rising slightly above estimate at 0.3%, so as CAPEX, the picture for Q2 contrast starkly. Energy shock is going to be a huge issue for economic growth in Q2 but should be partially shielded by stimulus for now. USD/JPY is trading 0.09% higher at 158.92 as JGB yields once again take off.
Trump is still doing his rounds of talks regard the geopolitical front. In late NA session, he mentioned an attack was called off due to the asking of UAE and Saudi leaders. Then, he goes on saying there is "good chance of Iran deal after Gulf states secure attack pause". Market is so far ignoring him and see major equity indexes lower with Hong Kong and Chinese equities outperforming. AUD/USD is trading 0.45% lower at 0.7136. NZD/USD is trading 0.33% lower at 0.5855 while USD/CAD rises 0.07% as both Brent and WTI slightly higher. Else, EUR/USD is down 0.12% and GBP/USD down 0.14%.