European Politics Slams the EUR, with Trump to Drive the USD

Earlier in the Day:

Economic data released through the Asian session was on the lighter side this morning, with stats limited to employment data out of Japan.

For the Japanese Yen, the jobs to applications ratio remained unchanged at 1.59 in April, coming up short of a forecasted rise to 1.60, while Japan’s unemployment rate held steady at 2.5%, which was in line with forecasts.

The Japanese Yen moved from ¥109.451 to ¥109.397 against the U.S Dollar upon release of the figures before rising to ¥108.98 at the time of writing, up 0.40% for the session.

While diplomatic efforts were underway to get the North Korea – U.S Summit back on track for 12^th June, talks of possible sanctions to be imposed on North Korea this week, political uncertainty in Italy as voters go back to the polls and a slump in crude oil prices weighed on market risk appetite through the morning, supporting the Japanese Yen.

Elsewhere, the negative sentiment saw the Aussie Dollar down 0.17% to $0.7533, with the Kiwi Dollar down 0.14% to $0.6932.

In the equity markets, the stronger Yen weighed on the Nikkei, which was down 0.60% ahead of the close, while the Hang Seng and CSI300 reversed Monday’s gains, with declines of 0.68% and 0.64% respectively. Bucking the trend through the morning was the ASX200, which was up 0.16% at the time of writing, the index looking to make only its second gain in the last 9-days.

The Day Ahead:

For the EUR, economic data out of the Eurozone this morning is limited to consumer confidence figures out of France, Italy and Spain, which will unlikely provide much direction to the EUR, as the markets continue to monitor political events in Italy, fresh elections now expected later in the year or early next year, which could turn out to be a vote on Italy’s membership in the Eurozone.

The markets don’t need to go too far back in history to assess the possible impact of an Italian exit from the EUR, with Greece having threatened a similar move just a few years ago, the only difference being that Italy is the Eurozone’s 3^rd largest economy, not one of the smallest.

President Mattarella’s veto of anti-EUR economic minister Savona may ultimately deliver a united 5-Star League party to take Italy out of the Eurozone and the sooner the coalition government calls for an election, the higher the probability of an exit.

If things weren’t bad enough, Spanish Prime Minister Rajoy is reportedly facing a vote of no confidence on Friday, with a general election likely to take place after the summer, which could see another populist party enter the higher echelons of European politics.

At the time of writing, the EUR was down 0.10% to $1.1613, European politics centre stage for the EUR through the day.

For the Pound, there are no material stats scheduled for release following Monday’s holiday, with market focus likely to remain on Brexit chatter, the British government having yet to deliver some cause for celebration as the EU continues to antagonise the government’s efforts to find a favourable path out of the EU next March.

The Pound was down 0.06% to $1.3303 at the time of writing, reversing gains from earlier in the day.

Across the Pond, economic data out of the U.S this afternoon includes May’s consumer confidence figures and March house price numbers, with focus expected to be on consumer confidence midway through the 2^nd quarter.

A forecasted slight easing in consumer confidence will unlikely be too damaging for the U.S Dollar, while the markets will continue to focus on noise from the Oval Office. Updates on the planned U.S – North Korea Summit and trade tariffs will be in focus through the day, with reports of the U.S planning to roll out fresh sanctions on North Korea as early as today another factor to consider later in the day.

At the time of writing, the Dollar Spot Index was down 0.14% to 94.282, with falling Treasury yields pinning back the Dollar in the early part of the day.