Euro rebounds, French far right lead smaller than feared

DXY dips on weak US PCE; Japan Tankan, China Caixin PMI up

Summary

US Personal Consumption Expenditure matched expectations of weaker read in May, at 0.1% from 0.3% in April. The Dollar Index (DXY), which measures the value of the Greenback against a basket of 6 major currencies dipped to 105.85 from 105.95.

 In France, the far-right National Rally party won 34% of the vote, a smaller margin than some polls indicated. The Euro (EUR/USD) rebounded to 1.0737, up from Friday’s close at 1.0705.

Against the Japanese Yen, the Dollar was little changed, at 160.87 (160.80). Trading in the USD/JPY pair was more subdued ahead of today’s release of Japan’s Tankan, a quarterly survey of business confidence reported by the BOJ.

The Australian Dollar (AUD/USD) finished at 0.6677, up from Friday’s 0.6650. Stubborn inflation in Australia has prevented the RBA from implementing potential rate cuts.

Sterling (GBP/USD) rose to 1.2654 from 1.2643 against the overall weaker Greenback. The UK’s Revised Quarterly GDP rose to 0.7%, up from 0.6%, which was the median estimate.

Against the Asian and Emerging Market Currencies, the US Dollar finished with modest losses. The USD/CNH pair (Dollar-Offshore Chinese Yuan) eased to 7.2970 from 7.3050. USD/SGD (Dollar-Singapore) closed at 1.3555, down from 1.3585 previously.

Global bond yield rose. The US 10-year yield climbed to 4.40% from 4.29% Friday. Germany’s 10-year Bund Yield was last at 2.49% (2.44%). The UK 10-year Gilt yielded 4.17% (4.13%).

Other economic data released Friday saw Germany’s Unemployment Rate climb to 6.0% from 5.9% previously. US May Personal Income rose 0.5%, up from 0.3% previously. US Personal Spending in May climbed to 0.2% from 0.1% previously but was lower than estimates at 0.3%.

On Saturday China released its June Manufacturing PMI which was unchanged at 49.5. China’s June Non-Manufacturing PMI eased to 50.5 from 51.1, and lower than estimates at 51.0.

EUR/USD – The Euro soared to 1.0749 overnight highs, against Friday’s opening at 1.0705. The shared currency slumped to an overnight low at 1.0685 before rebounding. The Euro also gained versus the Japanese Yen to 172.60 (172.10 Friday).

GBP/USD – Sterling settled at 1.2654 at the New York close, up from Friday’s open at 1.2640. The British Pound traded to an overnight high at 1.2663 while the overnight low recorded was 1.2620. A softer Greenback lifted the British currency.

USD/JPY – The Dollar was last at 160.90 Japanese Yen. In another choppy session, the US currency soared to an overnight high at 161.28 before easing. The overnight low recorded for the USD/JPY pair was 160.26.

AUD/USD – The Aussie Battler rallied to 0.6677 against the Greenback, up from Friday’s open at 0.6647. The Australian Dollar traded to 0.6684 overnight highs before dipping. The overnight low recorded for the Aussie Battler was 0.6620.

On the lookout

The week starts off with a busy economic data calendar for today. Australia releases its Judo Bank Manufacturing PMI report (f/c 47.5 from 47.5 – ACY Finlogix). China follows with its June Caixin Manufacturing PMI (f/c 51.2 from 51.7 – ACY Finlogix). Japan follows with its June Consumer Confidence Index (f/c 36.5 from 36.2 – ACY Finlogix).

The UK kicks off Europe with its Nationwide House Prices (m/m f/c 0% from 0.4%; y/y f/c 1.5% from 1.3% - ACY Finlogix). Switzerland releases its May Retail Sales (m/m f/c 0.1% from 0.2%; y/y no f/c, previous was 2.7% - ACY Finlogix).

France releases its June Manufacturing PMI (f/c 45.3 from 46.4 – ACY Finlogix). Italy follows with its June Manufacturing PMI (f/c 45.3 from 46.4 – ACY Finlogix). Germany follows with its June Final Manufacturing PMI (f/c 43.4 from 45.4 – ACY Finlogix).

The Eurozone is next with its Eurozone June Final Manufacturing PMI (f/c 45.6 from 47.3 – ACY Finlogix). The UK is next with its June S&P Global Manufacturing PMI (f/c 51.4 from 51.2 – ACY Finlogix), UK May Mortgage Approvals (f/c 61k from 61.1k – Acy Finlogix).

Germany releases its June Preliminary Inflation Rate (m/m f/c 9.2% from 0.1%; y/y f/c 2.3% from 2.4% - ACY Finlogix). The US rounds up today’s calendar report with its US S&P Global Manufacturing PMI (f/c 51.7 from 51.3 – ACY Finlogix), US June ISM Manufacturing PMI (f/c 49 from 48.7 – ACY Finlogix).

Trading perspective

The weaker than expected US Personal Consumption Expenditure pressured the US Dollar and kept a lid on the topside. Expect the Greenback to consolidate in Asia with a soft tone. Traders will continue to monitor developments in France on the upcoming elections. On Saturday, the Far-Right National Rally party was projected to have taken more than a third of the votes. French President Emmanuel Macron’s Together party reportedly has 21% of the votes.

EUR/USD – The shared currency has immediate resistance today at 1.0750 followed by 1.0780 and 1.0810. Immediate support can be found at 1.0700 and 1.0670. Keep an eye on the French election results. Uncertainty on the outcome will limit the Euro’s topside. Look for the Euro to trade in a likely range of 1.0670-1.0770. Prefer to sell Euro rallies.

USD/JPY – The Dollar kept its bid against the Japanese currency despite a softer finish versus other rivals. On the day, look for immediate resistance at 161.30 followed by 161.60. Immediate support can be found at 160.50, 160.20 and 159.90. Look for more choppy trade ahead, likely between 160.20-161.20 today. Trade the range.

AUD/USD – The Aussie Battler held its own against the Greenback, rallying to finish at 0.6677, from 0.6647 Friday. Look for immediate support on the AUD/USD pair to 0.6640 followed by 0.6610. Immediate resistance can be found at 0.6700 and 0.6730. Look for consolidation in a likely trading range today of 0.6620-0.6720. Prefer to sell Aussie on strength today.

GBP/USD – Sterling rallied to 1.2654 from 1.2640 Friday. On the day, look for immediate support at 1.2630 followed by 1.2600 and 1.2570. On the topside, immediate resistance can be found at 1.2680 followed by 1.2710. Look for Sterling to trade in a likely range today of 1.2630-1.2730. Trade the range, the preference is to sell Sterling on strength.