Top Stories
- UK Unemployment at best rate in nine months
- EZ Trade Balance in line
- Nikkei -1.12% Europe -0.58%
- Oil at $92/bbl
- Gold at $1536/oz.
Overnight Eco
- AUD Westpac Consumer Confidence (
MAY
) 0.8% vs. -1.6%
- JPY Tertiary Industry Index (MoM) (
MAR
) -0.6% vs. -0.3%
- CHF ZEW Survey (Expectations) (
MAY
) -4.0 vs. 2.1
- EUR Euro-Zone Consumer Price Index (MoM) (APR) 2.6%
- EUR Euro-Zone Trade Balance s.a. (euros) (
MAR
) 4.3B
- GBP Jobless Claims Change (APR) -13.7K vs. 4.9K
- GBP Claimant Count Rate (APR) 8.2% vs. 8.3%
Event Risk on Tap
- USD Housing Starts (MoM) (APR) expected at 4.0%
- USD Building Permits (MoM) (APR) expected at -4.5%
- USD Industrial Production (APR) expected at 0.5%
- CAD Manufacturing Shipments (MoM) (
MAR
) expected at 0.3%
Price Action
- USD/JPY trades to 80.35
- AUD/USD drops to .9900 but stabilizes
- GBP/USD stabilizes at 1.5950 post labor data
- EUR/USD probes below 1.2700 but bounces
The selloff in risk FX continued in overnight European trade
with EUR/USD plumbing fresh lows below the 1.2700 figure while
cable dropped through the 1.5900 barrier in the wake of a dovish
BOE inflation report. In Europe, authorities continued to navigate
the Greek crisis with German Chancellor Angela Merkel reaffirming
her support for Greece to remain within the monetary union, but
fears of a run on Greek banks kept markets on the edge and the pair
remained under pressure for most of the night after making several
weak attempts at a rebound.
Cable initially received a boost from better than expected labor
data as claimant count surprised to the upside declining by -13,700
versus forecasts of 4,900 gain. The unemployment rate dropped to
8.2% from 8.3% the month prior. This was the fastest pace of job
growth in nine months indicating that UK labor markets remain
relatively buoyant despite broader economic slowdown in UK.
This was the first back-to-back fall on the month in the
claimant count since September and October 2010 and the largest
monthly decline since July 2011. There was some speculation that
the upcoming Olympics may have created a temporary uptick in labor
demand, but there was no anecdotal evidence to that effect. London
did show the largest decline in the claimant count of all the
regions, but it was consistent with having the largest population.
On the down side, average earnings rose only 0.6% versus 1.1% eyed
indicating that UK consumers are likely to remain under pressure as
income growth lags far behind the CPI which continues to hover
above 3%.
The rally in cable was short lived however after a dour BOE
inflation report which noted that growth in UK was slower than
initially forecast while inflation would remain higher. The news
drove the pair through the 1.5900 figure as traders sold in fears
that the BOE may entertain further QE measures to stimulate the
economy. The pair however is grossly oversold and may see a small
rebound if risk appetite returns as the day progresses.
With risk FX in a near free fall, the currency market has
quickly become skewed to the downside and is now vulnerable to a
short covering rally on even a morsel of good news. If the Troika
and Greece could amend their agreement requiring an easing of the
bailout rules, the EUR/USD could quickly recover as fears of EZ
fracture recede. If on the other hand, the market sees no signs of
a compromise as Greece heads into another election the selling in
the pair could quickly accelerate with 1.2500 coming into view.
Several analysts have pointed out that EUR/USD has made habit of
making bottoms at mid-month points this year, but that pattern will
only hold if there is some positive news on Greece.
FX Upcoming
| Currency |
GMT |
EST |
Release |
Expected |
Prior |
| USD |
12:30 |
8:30 |
Housing Starts (MoM) (APR) |
4.0% |
-5.8% |
| USD |
12:30 |
8:30 |
Building Permits (MoM) (APR) |
-4.5% |
4.5% |
| USD |
12:30 |
8:30 |
Industrial Production (APR) |
0.5% |
0.0% |
| CAD |
12:30 |
8:30 |
Manufacturing Shipments (MoM) (
MAR
) |
0.3% |
-0.3% |