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Recent political developments in Spain and Italy likely helped to revive risk appetite.

And while the (mostly) positive political developments also helped to stabilize the euro, it was the Kiwi that was apparently the main beneficiary since the Kiwi easily steamrolled its peers. The yen, meanwhile, was the main casualty.

  • German retail sales m/m: 2.3% vs. 0.5% expected, -0.4% previous
  • German import prices m/m: 0.6% vs. 0.8% expected, 0.0% previous
  • French consumer spending m/m: -1.5% vs. 0.2% expected, 0.2% previous
  • French preliminary GDP q/q: 0.2% vs. 0.3% expected, same as previous
  • KOF Swiss economic barometer: 100.0 vs. 104.7 expected, 103.3 previous
  • Spanish flash HICP y/y: 2.1% vs. 1.7% expected, 1.1% previous
  • German unemployment change: -11K vs. -10K expected, -8K previous
  • Credit Suisse economic expectations: 28.0 vs. 7.2 previous
  • German preliminary HICP y/y: 2.2% vs. 1.8% expected, 1.4% previous

Major Events/Reports:

Italy-related updates

Earlier today, separate reports from Corriere Della Sera and ANSA cited Luigi Di Maio, the leader of the 5-Star Movement, as saying that the 5-Star Movement is no longer thinking about impeaching Italian President Sergio Mattarella.

This is good news and likely removed some political uncertainty.

However, the goods news doesn’t stop there since Bloomberg and Reuters later released separate reports that cited unnamed sources (just one source in Reuters’ case) as saying that the 5-Star Movement and League are renewing efforts to form a coalition government after the initial plan failed to pan out after Mattarella refused to endorse Savona, a known Eurosceptic, as a economy minister.

This likely helped to ease political uncertainty even further and dialed down expectations that Italy may soon be having fresh elections. And remember, Di Maio claimed in a Facebook post yesterday that the would-be coalition government had no plans to exit the euro and was even willing to work with other E.U. Member States.

However, Matteo Salvini, the leader of the League, also had some press time and he called for fresh elections as soon as possible. He did admit that elections in July would be “disruptive” for Italy, though.

Spain-related updates

Albert Rivera, leader of Spain’s Ciudadanos party said that his party will vote against a no-confidence vote directed at Spanish PM Mariano Rajoy, which reduces the chance that Rajoy will get ousted this Friday, according to a Reuters report.

However, Rivera also said in a later interview that Rajoy should voluntarily step down and call for snap elections.

Rajoy, for his part, was quoted by the Associated Press as saying that he has no plans to step down. Instead, Rajoy plans to “carry out the mandate granted by Spaniards,” which means that Rajoy plans to serve out his term until 2020.

Risk appetite returns to Europe

The major European equity indices finally printed some gains after getting whipped since last week, which is a sign that risk appetite is finally making a comeback in Europe.

And from the looks of it, we’re seeing some relief/bargain buying since recent political developments in Spain and Italy appear to help remove some uncertainty.

  • The pan-European FTSEurofirst 300 was up by 0.06% to 1,506.17
  • Germany’s DAX was up by 0.52% to 12,732.11
  • The blue-chip Euro Stoxx 50 was up by 0.26% to 3,434.75

The risk-friendly vibes in Europe also kept U.S. equity futures well-supported.

  • S&P 500 futures were up by 0.45% to 2,704.25
  • Nasdaq futures were up by 0.34% to 6,968.25

Major Market Mover(s):

NZD

The higher-yielding Kiwi easily dominated its peers, very likely because of the returning risk-on vibes in Europe.

NZD/USD was up by 50 pips (+0.73%) to 0.6969, NZD/CHF was up by 30 pips (+0.44%) to 0.6901, NZD/JPY was up by 64 pips (+0.84%) to 75.94

JPY

The risk-on vibes may have been great for the higher-yielding Kiwi, but it was terrible for the safe-haven yen, so much so that the yen found itself at the bottom of the forex heap.

USD/JPY was up by 12 pips (+0.11%) to 108.96, CHF/JPY was up by 45 pips (+0.42%) to 110.06, AUD/JPY was up by 56 pips (+0.68%) to 82.24

EUR

The euro was bested by the Kiwi and the Aussie and was only the third best-performing currency of the session.

Even so, the euro is worth mentioning since it finally had a good session after getting clobbered during the past few days. And we can likely thank the (mostly) positive political developments in Spain and Italy for that.

EUR/USD was up by 58 pips (+0.50%) to 1.1636, EUR/JPY was up by 77 pips (+0.62%) to 126.80, EUR/GBP was up by 33 pips (+0.39%) to 0.8756

Watch Out For:

  • 12:15 pm GMT: ADP’s U.S. non-farm employment change (191K expected vs. 204K previous)
  • 12:30 pm GMT: Canada’s current account (-$18.1B expected vs. -$16.3B previous)
  • 12:30 pm GMT: Canada’s RMPI (2.1% expected, same as previous) and IPPI (0.6% expected, 0.8% previous)
  • 12:30 pm GMT: U.S. preliminary GDP (no change from 2.3% expected)
  • 12:30 pm GMT: U.S. goods trade balance (-$71.2B expected vs. -$68.3B previous)
  • 12:30 pm GMT: U.S. preliminary wholesale inventories (0.4% expected, 0.3% previous)
  • 2:00 pm GMT: BOC monetary policy decision and statement (Overnight rate steady at 1.25% expected); read Forex Gump’s Preview
  • 2:45 pm GMT: SNB Overlord Thomas Jordan will speak
  • 6:00 pm GMT: The U.S. Fed’s so-called “Beige Book” will be released