With not a lot of catalysts during the Asian session, forex traders concentrated on weekend headlines instead.
- China’s banks still out on Dragon Boat Festival holiday
- NZ building consents down by 7.6% vs. 1.2% slip in March
- Japan’s household spending (y/y) declines by 1.4% vs. 0.7% downtick expected, -1.3% previous
- Japan’s unemployment rate remains at 2.8% as expected
- Japan’s retail sales (y/y) up by 3.2% in April vs. 2.2% uptick expected, 2.1% previous
- BOJ’s core CPI (y/y) improves from -0.1% to 0.2% in April
- AU building approvals jumps by 4.4% vs. 3.2% growth expected, 10.3% decline in March
Japan’s data dump
Earlier today we saw the world’s third largest economy print its retail sales, unemployment rate, and household spending numbers for the month of April.
Retail sales rose by an annualized rate of 3.2% for the month after rising by 2.1% in March. Not only does the release mark the sixth month of gains for the report but it also marks the fastest pace since April 2015.
Household spending numbers weren’t as rosy, however. Consumption declined by 1.4% from a year ago in April following a 1.3% decrease in March. This means that household spending has now been declining for 14 consecutive months. Yikes!
Last but not the least is the unemployment rate, which remained at a 23-year low of 2.8% in April. Looking at the details, we can see that the jobs-to-applicants ratio has improved from 1.45 to 1.48 in April.
EUR pressured by Greek and Italian headlines
The euro hit a one-week low against the Greenback when German newspaper Bild – without citing sources – reported that Greece has threatened to opt out of the next bailout payment if its creditors could not agree on a debt relief.
Remember that Athens has a chunk of bailout debt repayments due in July, so a decision to NOT pay this round would increase the possibility of a default.
Meanwhile, former Italian Prime Minister Matteo Renzi also shook the markets with comments on possibly holding the election at the same time as Germany (read: September 2017).
Italy isn’t due for another election until May 2018, so the possibility of snap elections got some investors jittery.
And then there were comments by ECB head honcho Mario Draghi himself, who recently said that the euro zone still needs “extraordinary amount” of monetary stimulus to sustain its recovery.
New election poll weighs on GBP
The pound encountered another round of selling after a fresh election poll underscored the narrowing lead of Theresa May’s Conservative Party.
A poll taken by Survation (in behalf of Good Morning Britain) showed the Conservative Party remaining at 43% while the Labour Party gained 3 points to 37%. This narrows the Tories’ lead to 6% after dropping from 18% to 9% in the previous week.
The poll was taken in May 26 – 27 but was released just hours after Jeremy Corbyn and Theresa May faced off in a televised Q&A.
Major Market Mover(s):
The common currency stumbled after getting triple roundhouse-kicked by headlines from Greece, Italy, and the ECB.
EUR/USD fell by 47 pips (-0.42%) to 1.1125, EUR/GBP dropped by 20 pips (-0.23%) to .8682, and EUR/CAD declined by 40 pips (-0.27%) to 1.4994.
Pound sellers had another party during the Asian session thanks to a new poll reflecting a narrowing lead for Theresa May in the elections.
GBP/USD fell by 26 pips (-0.20%) to 1.2814 while GBP/JPY dropped by 74 pips (-0.52%) to 142.15.
The low-yielding franc set aside its safe haven status and was pulled lower together with the other major European currencies.
USD/CHF popped up by 26 pips (+0.27%) to .9791, GBP/CHF edged 8 pips higher (+0.06%) to 1.2545, and CHF/JPY fell by 68 pips (-0.60%) to 113.30.
Watch Out For:
- TBD: German preliminary CPI (-0.1% expected, 0.0% previous)
- 6:00 am GMT: German import prices (0.2% expected, -0.1% previous)
- 6:45 am GMT: French consumer spending (0.8% expected, -0.4% previous)
- 6:45 am GMT: French preliminary GDP (q/q) to remain at 0.3%
- 7:00 am GMT: Switzerland’s KOF leading indicator (106.2 expected, 106.0 previous)
- 7:00 am GMT: Spanish flash CPI (y/y) (2.1% expected, 2.6% previous)
- 9:00 am GMT: Euro Zone unemployment rate (9.4% expected, 9.5% previous)
- 9:00 am GMT: Euro Zone business climate index (1.12 expected, 1.09 previous)
- 9:00 am GMT: Euro Zone industrial sentiment (3.1 expected, 2.6 previous)
- 9:00 am GMT: Euro Zone economic confidence (110.1 expected, 109.6 previous)