European Summary and Highlights 08July
The EUR initially fell back in the European morning, mainly against the CHF, following the unexpected victory for the Left Alliance in the second round of the French parliamentary election.
European morning session
The EUR initially fell back in the European morning, mainly against the CHF, following the unexpected victory for the Left Alliance in the second round of the French parliamentary election. But the decline was short-lived, with equities also recovering from an initial dip, and the EUR finished higher on the session, with EUR/USD up around 20 pips to 1.0840 and EUR/CHF up 20 pips to 0.9710 after an initial dip to 0.9680. USD/JPY and consequently EUR/JPY were also higher on the session, with USD/JPY moving back above 161 and EUR/JPY reaching new 32 year highs at 174.64.
There wasn’t a great deal of other new. The German trade surplus was higher than expected at EUR24.9bn in May, while the Sentix investor confidence index fell bacin July, breaking a run of 8 consecutive rises.
Asia session
The France election seems to have resulted in a hung parliament as leftist Nouveau Front Populaire won the most seats, Macron's centrist the second and Le Pen's far right Rassemblement National the last. Macron's government has suggested little interest in forming coalition with NFP or RN but would rather seek support from more moderate parties within both sides, which is likely to fail due to major differences. EUR/USD opened lower at 1.08 from 1.0838 previously closed on Friday and is trading 0.06% lower at 1.0831. GBP/USD also gap 18 pips lower but has filled the gap, currently trading 2 pips lower at 1.2812.
The May Japan Labor Cash Earning has come in lower than estimates of 2.1% at 1.9% y/y, earning in April has also been revised to 1.6% from 2%. While it continues to point forwards accelerating wage growth, its progress does not allow the BoJ to step too far in the July meeting with bond purchase cut and rate hike. Small Japanese firms are also finding it more difficult to hike wages as they would not be passing the cost to consumers as efficient as larger firms. USD/JPY is trading 0.12% lower at 160.56. Else, AUD/USD is up 0.06%, NZD/USD up 0.03% and USD/CAD slipped 0.04%.