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The pound made pips rain during the Asian session as traders priced in the U.K. possibly staying in the customs union for longer.

Meanwhile, the comdolls took the most advantage of the retracement in the Greenback’s gains as overall risk appetite reigned despite trade-related concerns between the U.S. and China.

  • NZ PPI input up by 0.6% vs. 0.3% expected, 0.9% in Q4 2017
  • NZ PPI output gains 0.2% as expected, 1.0% growth in Q4 2017
  • Japan’s core machinery orders drops by 3.9% against 2.1% uptick in February
  • Australia’s MI inflation expectations picks up by 3.7% vs. 3.6% improvement in March
  • Australia’s unemployment rate shoots up from 5.5% to 5.6% in April
  • Australia adds net of 22,600 jobs in April vs. 19,800 expected, downwardly revised 700 dip in March
  • Hong Kong’s central bank intervenes in currency markets for a second day in a row
  • China’s foreign direct investment (ytd/y) up by 0.1% vs. 0.5% increase in March

Major Events/Reports:

Australia’s jobs report

It was all good in the hood earlier today as Australia printed its latest labour market figures. While the unemployment rate edged higher from 5.5% to 5.6% in April, the labour force participation rate also crawled higher from 65.5% to 65.6%.

This suggested that the increase in jobless rate may be partly due to additional applicants pushing participation rate higher rather than a lack of new jobs created.

Details tell us that a net of 22,600 had found jobs in April. Specifically, full-time employment increased by 32,700 and replaced the 10,000 jobs lost.

Overall, a pretty good turnout for the report especially after last month’s net jobs gains was reduced from +4,900 to -700.

UK to remain in customs union for longer?

The biggest story of the hour is a Telegraph report hinting that Britain might be open to staying in the EU’s customs union beyond 2021.

If you recall, the U.K. had already secured a transition deal with the EU that it would keep its trade deals steady until 2020.

But according to Telegraph, the Brexit Cabinet had already signed off on the new “backstop” in order to avoid a hard Irish border.

Though no official word had gone out yet, the prospect of a more gradual Brexit had pushed the pound higher across the board.

Mixed risk sentiment

The Asian bourses mostly went in the way of their U.S. counterparts as traders priced in their concern for the U.S.-China trade relations as well as higher interest rates from the U.S.

Nikkei dodged the bullet, though, despite (or because of?) Japan sharing that it’s informing the World Trade Organization of its plans to slap on $409M worth of tariffs in response to the U.S. imposing tariffs on steel and aluminum imports.

  • Nikkei is up by 0.72% to 22,879.7
  • Australia’s A SX 200 is down by 0.13% to 6,104.1
  • Hang Seng is down by 0.04% to 31,098.0
  • Shanghai index is down by 0.23% to 3,162.229

Meanwhile, commodity currencies recovered with gold taking advantage of dollar weakness and oil prices being pushed by a deeper-than-expected pullback in oil inventories printed in the previous session.

  • Gold is up by 0.14% to $1,292.50
  • Brent crude oil is up by 0.06% to $79.37
  • U.S WTI is up by 0.27% to $71.71

Major Market Mover(s):

USD
The dollar weakened across the board on a pullback in U.S. Treasury yields and profit-taking ahead of trade talks between China and U.S. representatives today.

EUR/USD is up by 20 pips (+0.17%) to 1.1827
USD/JPY is down by 16 pips (-0.14%) to 110.24
USD/CHF is down by 18 pips (-0.17%) to .9995

Interestingly enough, it was especially weak against the comdolls.

AUD/USD is up by 28 pips (+0.38%) to .7543
NZD/USD is up by 23 pips (+0.33%) to .6919
USD/CAD is down by 31 pips (-0.24%) to 1.2759

GBP
The pound clobbered its major counterparts on Telegraph’s news that Britain may choose to stay with the EU customs union after the 2020 deal has expired.

GBP/USD is up by 70 pips (+0.52%) to 1.3556
GBP/JPY is up by 56 pips (+0.38%) to 1.9589
EUR/GBP down by 28 pips (-0.32%) to .8724
GBP/CHF is up by 46 pips (+0.27%) to 1.3549

Watch Out For:

  • 8:00 am GMT: Italy’s trade balance (3.74B EUR expected, 3.10B EUR previous)