Forex news from the European trading session - 1 June 2018
Headlines:
- Spain's Rajoy voted out of office, Sanchez set for prime minister role
- EU's Mogherini says to proceed with WTO case against the US
- UK May manufacturing PMI 54.4 vs 53.5 expected
- Italy Q1 final GDP +0.3% vs +0.3% q/q prelim
- Eurozone May final manufacturing PMI 55.5 vs 55.5 prelim
- UK plans to give Northern Ireland dual UK/EU status after Brexit - Reuters
- Germany May final manufacturing PMI 56.9 vs 56.8 prelim
- France May final manufacturing PMI 54.4 vs 55.1 prelim
- Italy May manufacturing PMI 52.7 vs 53.0 expected
- Switzerland May manufacturing PMI 62.4 vs 62.5 expected
- Spain May manufacturing PMI 53.4 vs 54.0 expected
- Australia May commodity prices (SDR terms) +3.6% vs -1.4% y/y prior
- Germany's Altmaier says EU may seek answer to US tariffs by working with Mexico, Canada
- Germany's Altmaier says US tariff decision is a 'big mistake'
Markets:
- GBP leads, JPY lags on the day
- European equities higher, Italy MIB leads gains
- Gold up by 0.07% to $1,297.71
- WTI down by 0.88% to $66.45
- US 10-year yields up by 2.9 bps to 2.888%
- Bitcoin up by 0.14% to $7,549
It was a lackluster session for the most part with narrow ranges prevailing ahead of the US jobs report that is to come at 1230 GMT. The dollar headed into the session as the leader, but soon gave up gains and was mixed against the major bloc to start trading.
The session saw different currencies take on different themes, with markets all around staying uncorrelated as well. The euro tracked lower at the start of the session, before moving back towards the 1.1700 level against the dollar as Italian assets are having a good day once again ahead of the coalition government formation.
Meanwhile, USD/JPY tracked around 109.00 to 109.20 levels for the session - staying bid as yields are holding up and equities are doing well on the day too. GBP/USD on the other hand made headway as EUR/USD broke above 1.1700 and that saw the pair break above 1.3300 to touch a high of 1.3329 on the day and close in on the 200-hour MA. Sterling also got a bit of a lift from a beat in the manufacturing PMI reading earlier.
Commodity currencies on the other hand were beaten down for most of the session and traded in a narrow range - this despite equities in Europe posting solid gains. As I said, different themes seem to be dominating different currencies/markets with the AUD and NZD seemingly more focused on the trade war rhetoric.
Equities in Europe on the other hand are more focused on domestic developments in Italy and Spain rather than the US-EU trade spat. Italy's MIB leads gains as we await Five Star and Lega to formalise their government proposal. In Spain, Rajoy lost out in the no-confidence vote and Socialist leader Pedro Sanchez is set to take over as prime minister. Spanish assets seem to be cheering the appointment with the IBEX up 2% on the day and 2-year yields falling drastically after the result.
The market is all set up for the big one with the US non-farm payrolls data due. That will be the next tell in the market for directional movement, but also keep an eye out on further developments in the trade rhetoric as it could be a case of the market being too complacent about it right now. And if the market gets caught out, things could turn ugly and fast.
