EU Elections, Economic Data and the Trade War to Drive the EUR, GBP and USD

Earlier in the Day:

Following a relatively busy Wednesday, Japan’s May prelim manufacturing PMI figures provided direction through the early part of the day.

The lack of stats left the markets to respond to trade war chatter and the FOMC meeting minutes released late on Wednesday.

Another consideration through the Asian session this morning was Brexit and the EU Parliamentary elections that are expected to bring an early end to British Prime Minister Theresa May’s political career.

For the Japanese Yen,

According to prelim figures, the Manufacturing PMI fell from 50.2 to 49.6 in May. Forecasts were for a rise to 50.5.

• While new orders fell at a slower rate, new export orders decreased at a fast rate in May.
• Both output and new orders decreased for a 5^th consecutive month.
• Businesses became pessimistic about the year ahead for the first time in six-and-a-half years.

The Japanese Yen moved from ¥110.224 to ¥110.218 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.09% to ¥110.26 against the U.S Dollar.

Elsewhere,

At the time of writing, the Kiwi Dollar was down by 0.09% to $0.6489, with the Aussie Dollar down 0.13% to $0.6873.

Trade war jitters weighed on the pair early on, as the U.S looks to turn the screw on China in the extended trade war.

In the equity markets

The Nikkei and ASX200 were down by 0.82% and by 0.32% early in the session. The threat of more Chinese companies being blacklisted suggests that there could be more pain to come in the U.S – China trade war.

For the Hang Seng and CSI300, things were not much better, with the pair down by 1.06% and 0.57% respectively.

The Day Ahead:

For the EUR

It’s a particularly busy day ahead on the economic calendar. 2^nd estimate German GDP numbers, member state prelim May private sector PMIs and Germany’s IFO Business climate index figures are due out.

Barring deviation from 1^st estimate GDP numbers, the focus will be on Germany’s manufacturing PMI and IFO business climate figures.

Outside of the stats, the ECB monetary policy meeting minutes are due out, which will have an influence on the EUR.

While the EU election results are not due out until the weekend, both Britain and the Netherlands vote today. A vote in favor of the Brexit Party would point towards a hard Brexit, which would be negative for the Pound and, to a lesser extent, the EUR. The focus has been on the UK and the Brexit Party, will there be any surprises in the weekend results?

At the time of writing, the EUR was up by 0.02% to $1.1152.

For the Pound

There are no material stats scheduled for release through the day. The focus will be on the EU parliamentary elections and events in the UK Parliament.

Theresa May’s days appear to be numbered. She may not make it to the weekend to face a likely in party backlash. The Tories will blame the PM, but the divisions in the ranks since the EU Referendum are ultimately to blame.

At the time of writing, the Pound was down 0.13% to $1.2649.

Across the Pond

Economic data is on the heavier side this afternoon. Prelim private sector PMI numbers, weekly jobless claims figures, and new home sales numbers are due out this afternoon.

Barring particularly dire weekly jobless claims figures, the market focus will likely be on the private sector PMI numbers. Of greater influence will be the prelim service sector PMI on the day.

Outside of the numbers, demand for U.S Treasuries could build on expectations of a Brexit Party victory in the EU and an end to Theresa May’s leadership. Any trade war chatter will also need to be considered.

At the time of writing, the Dollar Spot Index was up 0.07% to 98.107.

For the Loonie

It’s a quieter day ahead on the economic calendar. March wholesale sales figures are due out this afternoon.

While we can expect the Loonie to respond to the numbers, trade war chatter and private sector PMI numbers from the Eurozone and the U.S will likely influence crude oil prices and the Loonie through the day.

A combination of dire numbers and increased trade war tension would leave the Bank of Canada in an extended holding pattern. The Bank of Canada is due to deliver its May policy decision next week.

The Loonie was down 0.08% at C$1.3446, against the U.S Dollar, at the time of writing.