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A pretty busy start of the month for the major currencies, as traders priced in both trade and political concerns across the globe.

  • Japan’s Tankan manufacturing index down from 24 to 21 in Q2 2018
  • Japan’s Tankan non-manufacturing index improves from 23 to 24
  • Japan’s final manufacturing PMI lower from 53.1 to 53.0 in May
  • AU AIG manufacturing index slips from 57.5 to 57.4 in May
  • AU MI inflation gauge remains at 0.0%
  • AU ANZ job ads fall by 1.7% vs. 1.4% gain in April
  • China’s Caixin manufacturing PMI dips from 51.1 to 51.0 in May

Major Events/Reports:

China’s manufacturing PMI

Data from the world’s second-largest economy showed large manufacturers feeling a bit less optimistic in May. The official manufacturing PMI came in at 51.0, slightly lower than the expected (and April’s) 51.1 figure.

Details show that output had risen by the most in four months, while new orders also maintained its momentum. However, new export orders fell and employment dropped at its fastest rate since July 2017.

Firms are also a bit more cautious, with optimism over the rest of the year falling to a six-month low. This is probably why inventory and stocks of purchased and finished items also declined.

Overall, not a pretty picture ahead of the U.S. tariffs that are scheduled to take effect on Friday.

Germany’s Interior Minister threatens to quit

The stability of Angela Merkel’s coalition is rocked earlier today when Interior Minister and coalition partner CSU leader Horst Seehofer threatened to resign from his posts over his conflict with the Chancellor.

Seehofer is one of the more vocal critics against migration, even going as far as threatening to turn migrants away at the border against Merkel’s wishes two weeks ago.

In any case, the move took some shine off the migration deal the EU members signed last Friday, and translated to more uncertainty over Merkel’s leadership position.

Overall risk aversion

Political skirmishes in Germany, weak Chinese data, and uncertainty ahead of this week’s tariff implementations didn’t exactly instill confidence among the Asian session players.

  • Nikkei is down by 1.26% to 22,023.9
  • A SX 200 is down by 0.35% to 6,206.2
  • Hang Seng is up by 1.61% to 28,955.1
  • Shanghai index is down by 1.13% to 2,815.140

Crude oil also slipped as market players digested Trump’s weekend tweet about Saudi Arabia adding as much as 2M barrels per day to make up for Iran and Venezuela’s production shortfall.

  • Gold is down by 0.09% to $1,251.31
  • Brent crude oil is down by 1.33% to $78.16
  • U.S. WTI is down by 1.39% to $73.23

Major Market Mover(s):

EUR

The common currency took a one-two punch from overall risk aversion and concerns over Merkel’s leadership in Germany.

EUR/USD is down by 26 pips (-0.22%) to 1.1656
EUR/JPY is down by 20 pips (-0.15%) to 128.12
EUR/CHF is down by 7 pips (-0.06%) to 1.1559

AUD

The high-yielding Aussie took the most heat from a disappointing Chinese PMI report, trade war concerns, and profit-taking ahead of this week’s RBA statement.

AUD/USD is down by 22 pips (-0.30%) to .7380
AUD/JPY is down by 19 pips (-0.24%) to 81.75
EUR/AUD is up by 25 pips (+0.16%) to 1.5793
GBP/AUD is up by 37 pips (+0.21%) to 1.7859
AUD/NZD is down by 30 pips (-0.27%) to 1.0896

NZD

Kiwi bulls remained resilient despite the risk-averse trading environment. One possible explanation is a bit of profit-taking from last week’s shorts ahead of this week’s top-tier events.

NZD/CAD is up by 18 pips (+0.20%) to .8919
GBP/NZD is down by 20 pips (-0.10%) to 1.9461
EUR/NZD is down by 28 pips (-016%) to 1.7209
NZD/CHF is up by 9 pips (+0.13%) to .6716

Watch Out For:

  • 6:30 am GMT: AU commodity prices (y/y)
  • 7:15 am GMT: Switzerland’s retail sales (y/y) (2.6% expected, 2.2% previous)
  • 7:15 am GMT: Spain’s manufacturing PMI (53.6 expected, 53.4 previous)
  • 7:30 am GMT: Switzerland’s manufacturing PMI (61.1 expected, 62.4 previous)
  • 7:30 am GMT: Switzerland’s manufacturing PMI (61.1 expected, 62.4 previous)
  • 7:50 am GMT: France’s final manufacturing PMI to remain at 53.1?
  • 7:55 am GMT: No changes expected from Germany’s 55.9 manufacturing PMI
  • 8:00 am GMT: Euro Zone’s final manufacturing PMI expected to maintain 55.0 reading
  • 8:00 am GMT: Italy’s monthly unemployment rate (11.1% expected, 11.2% previous)
  • 8:30 am GMT: U.K.’s manufacturing PMI (54.1 expected, 54.4 previous)
  • 9:00 am GMT: Euro Zone PPI (0.4% expected, 0.0% previous)
  • 9:00 am GMT: Euro Zone unemployment rate to remain at 8.5%?