Analysts at Westpac Banking Corporation, (Westpac), explained that the euro extended gains sparked by the EU deal on migration, dragging other currencies with it. US data was mixed while equity sentiment improved notably.
Key Quotes:
"EUR/USD kicked off its rally on Friday from 1.1570 when the EU deal was announced, extending to above 1.1680 in NY. The pair gapped lower this morning to under 1.1640 as German interior minister Seehofer reportedly insisted on migration policies opposed by Chancellor Merkel. But it then bounced to 1.1690 on a report that Seehofer would resign. None of this was confirmed, so the euro could remain skittish short term.
The yen underperformed in the more positive risk environment, USD/JPY rising from 110.50 to highs above 110.90. AUD/USD extended Friday’s EUR-driven gain from 0.7345 pre-announcement to 0.7410. NZD similarly rose from 0.6740 to above 0.6790 early Monday. AUD/NZD eked a higher range of 1.0910-1.0935.
The Canadian dollar outperformed. USD/CAD dropped from 1.3260 to lows under 1.3140 in Friday NY trade, CAD helped by a bounce in oil prices and a slightly firmer than expected print on Canada Apr GDP, up 0.1% m/m, 2.5% y/y.
A mixed round of US data to end the week. May personal spending grew just 0.2%, weaker than expectations; real spending was subdued too, showing no growth in the month and the previous month was revised down from 0.4% to 0.3%. Lofty Q2 US GDP expectations took a hit in the wake of the more muted trend in consumer spending: the closely followed Atlanta Fed Q2 GDP “nowcast” was revised down 3.8% from 4.5%, while the NY Fed’s GDP tracker was trimmed from 2.9% to 2.8%.
The Michigan survey showed cooler household sentiment too, their index slipping to 98.2 from 99.3, the forward looking expectations sub-index hit a five month low. On the plus side, the Chicago manufacturing PMI was solid; climbing to 64.1, the second highest reading this year, from 62.7 last month, defying expectations for a small fall.
The US 10yr treasury yield eked a slightly higher range of 2.83%-2.87%, rising only late in the session, 2yr yields up from 2.51% to 2.53%. Fed fund futures yields continued to price 1 ½ more hikes in 2018.
Event risk
Australia’s data calendar is limited to unofficial data – June inflation gauge from Melbourne Institute and June ANZ Job Ads.
The Bank of Japan’s long-running Tankan business survey is due. Consensus on the large manufacturers index is +22, a slight cooling from Q1’s +24 but well above the 20 year average of 0 (the GFC low was -58). The response on USD/JPY will be limited again by the apparent lack of debate at the BoJ about any change in policy stance for some time.
In Asia we will see a flurry of Jun manufacturing surveys, including the Caixin-sponsored China PMI, which has been very stable lately around 51. Jun CPI data is due in both Indonesia and Thailand. Hong Kong markets are closed for a holiday.
The US data calendar is worth noting. May construction spending data will include revisions, so forecasts of Q2 GDP could be tweaked. The June national survey of manufacturing sentiment from the Institute for Supply Management is expected to ease only a touch, to a strong 58."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
Google starts indexing Bitcoin addresses
Bitcoin address data is live on Google search results after users realized on Thursday that the tech giant started indexing Bitcoin blockchain data. However, mixed reactions have followed the tech giant's reversed stance on the cryptocurrency.
A Hollywood ending for fourth quarter GDP
The latest revisions put Q4 GDP at 3.4%, the second fastest quarterly growth rate in two years. Much of the upside was attributable to stronger consumer spending, yet fresh profits data affirmed it was a good quarter for the bottom line as well with profits up by the most since the Q2-2022.