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The pound staged a broad-based recovery during the previous U.S. session and continued to do so during today’s Asian session. The risk-off vibes, poor Chinese data, and Australia’s jobs report, meanwhile, caused the Aussie to stumble a bit.

  • Net employment change in Australia: 12.0K vs. 19.0K expected, 18.3K previous
  • Australia’s jobless rate: 5.4% vs. 5.5% expected, 5.6% previous
  • Fixed asset investment in China (ytd/y): 6.1% vs. no change from 7.0% expected
  • Chinese industrial production (y/y): 6.8% vs. 6.9% expected, 7.0% previous
  • Chinese retail sales (y/y): 8.5% vs. 9.6% expected, 9.4% previous
  • Japan’s revised industrial production (m/m): 0.5% vs. no change from 0.3% expected

Major Events/Reports:

Australia’s jobs report

The Australian Bureau of Statistics released Australia’s May jobs report earlier.

And, well, it was mixed on the surface since employment only saw a net increase of 12.0K, missing expectations for a 19.0K increase, while the jobless rate dropped from 5.6% to a five-month low of 5.4%, better than the expected dip to 5.5%.

However, a closer look at the details reveal that the jobs report was actually negative overall.

For starters, jobs growth was driven by the 32.6K increase in part-time jobs since full-time jobs fell by 20.6K. Moreover, the previous reading was downgraded from +22.6K to +18.3K to reflect a downward revision for full-time employment growth in April (+28.0K vs. +32.7K originally).

And while the jobless rate did improve at a faster pace than expected, that was partially due to the labor force participation rate deteriorating from 65.6% to 65.5%.

Poor Chinese data

The National Bureau of Statistics released a bunch of economic reports during the session.

And unfortunately, they all failed to meet expectations while pointing to a slowdown in China’s economic growth.

As for specifics, fixed asset investment in China only increased by 6.1% from January to May, missing expectations by a long shot that it would maintain the +7.0% pace.

Total industrial production in China, meanwhile, only increased by 6.8% year-on-year in May, a tick slower than the expected 6.9% increase and slower than the previous month’s +7.0% to boot.

Domestic demand was also weaker-than-expected since retail sales in China only increased by 8.5% year-on-year, which is well below the +9.6% consensus.

PBoC holds firm

The People’s Bank of China (PBoC) announced earlier that it was keeping its monetary policy unchanged, which is contrary to expectations since the Fed announced a rate hike earlier and the PBoC usually tightens monetary policy following a Fed rate hike in order to limit capital outflows (from China) due to interest rate differentials.

Risk aversion in Asia-Pacific

Equity indices from the Asia-Pacific region were broadly in the red today. And market analysts say that the risk-off vibes were due to concerns over higher borrowing costs because of the Fed’s rate hike, growing fears over the trade spat between the U.S. and China, as well as poor Chinese economic data released during the session.

  • Australia’s ASX 200 was down by 0.16% to 6,014.30
  • New Zealand’s NZX 50 was up by 0.01% to 8,984.52
  • The Shanghai Composite was down by 0.28% to 3,041.22
  • Hang Seng was down by 0.77% to 30,489.00
  • The Nikkei Index was down by 0.52% to 22,847.00
  • KOSPI was down by 1.37% to 2,434.78

Major Market Mover(s):

AUD

The Aussie was already showing weakness from the get-go, likely because of the risk-off vibes.

The Aussie then tossed and turned when Australia’s jobs report came out mixed. Sellers eventually won out, though, and the Aussie got a final bearish kick when China released a bunch of disappointing economic reports.

AUD/USD was down by 13 pips (-0.18%) to 0.7564, AUD/NZD was down by 26 pips (-0.25%) to 1.0762, AUD/CHF was down by 14 pips (-0.19%) to 0.7447

GBP

The pound has been in recovery mode since yesterday’s U.S. session and it continued its broad-based recovery during today’s Asian session.

There were no apparent trigger for the pound’s recovery during the earlier session and there were no fresh catalysts that could have sustained the pound’s recovery during the Asian session.

However, it’s possible that we’re seeing some short-covering by GBP bears ahead of the U.K.’s retail sales report for later.

GBP/USD was up by 16 pips (+0.12%) to 1.3392, GBP/AUD was up by 73 pips (+0.42%) to 1.7721, GBP/CAD was up by 21 pips (+0.12%) to 1.7380

Watch Out For:

  • 6:00 am GMT: German final HICP (no change from 0.6% expected)
  • 6:45 am GMT: French final HICP (no change from 0.4% expected)
  • 8:30 pm GMT: Headline (0.5% expected vs. 1.6% previous) and core (0.3% expected vs. 1.3% previous) readings for U.K. retail sales
  • 11:45 am GMT: ECB monetary policy statement