Market Drivers July 03, 2018
EUR well bid after Mwrkel reaches deal
UK PMI Construction
Nikkei -0.12% Dax 0.72%
Europe and Asia:
AUD RBA holds at 1.5%
GBP UK PMI Construction 53.1 vs. 52.5
Risk FX was well bid in Asian and early European trade today with euro cable and all the commodity dollars rising against the buck in the wake of Angela Merkel’s deal on migration with her coalition partners.
The deal removes the risk of new elections in Germany and preserves the stability that Merkel has brought to Eurozone’s largest economy. The EURUSD, which managed to find support at the 1.1600 figure level yesterday, rose to a high of 1.1671 in early London dealing as traders breathed a sigh of relief. The pair has been basing around the 1.1500 level for the better part of the past month as it tries to form an intermediate term bottom, but still remains vulnerable to further trade tensions with the Trump Administration. An escalation of trade tariffs especially against the auto industry would upend the delicate rebound and the send the unit to fresh yearly lows. For now, however, the bellicose rhetoric has eased and that provided euro a modicum of support.
Meanwhile, in UK MPC member Saunders provided a boost for cable, dismissing the slowdown in Q1 GDP as primarily weather-related and hinting that QE will be reduced in the foreseeable future and stating that rates may need to rise faster than the market expects, UK PMI Construction data beat coming in at 53.1 versus 52.5 which added to positive flows.
Finally, in Australia, the RBA held rates steady for the 23rd month in a row and remained generally neutral in its outlook with a focus on consumer spending still key to its policy stance. Although the statement offered nothing new, Aussie rebounded in the aftermath of the release rising towards the .7400 level as it was buoyed by better risk sentiment and higher commodity prices. Tonight’s Retail Sales and Trade data could push the unit through .7400 if the numbers beat to the upside suggesting that consumer spending is starting to gain momentum.
In North America today the flows will slow to a crawl as equity markets will only trade half day ahead of the July 4th holiday in US. If risk sentiment holds up EURUSD could make a run to 1.1700 but the markets are likely to pause for the next 24 hours as all of the US economic data is scheduled for back of the week.