Market Drivers June 29, 2018
EU reaches a deal on migrant issue
UK GDP beats
Nikkei 0.15% Dax 1.34%
Europe and Asia:
EUR EZ CPI 1.2 vs. 1.4
USD core CPE 8:30
CAD GDP 8:30
USD Chicago PMI 9:45
A lot of action in Asia session today as risk FX popped across the board on relief that the EU summit reached a deal on the migrant issue.
EURUSD rose nearly 90 pips and cable followed in the wake of the announcement that EU leaders, after a five hour working dinner, came to an agreement on an issue that threatened to derail the Angela Merkel’s coalition and put a severe test on the EU union as whole after the populist right-wing government in Italy refused to ratify any if the EU motions at the summit.
The terms of the deal remain vague with a promise to create closed migrant centers that would process refugees on a voluntary basis, but so far no details emerged as to which countries would host the centers and what process would follow. Still, this seems to be pan-European effort deal with the problem in a standardized way instead of the current ad-hoc approach to the issue.
The positive sentiment saw little follow through in European trade, however, as both euro as risk FX pairs retreated from their highs, and it will be up to the North American traders to see if the rally can extend ahead of the holiday week in US. On the eco front, the CPI data out of Europe continued to show no price pressures with core coming in at 1.2% versus 1.4% eyed. While in UK the final revision of Q1 GDP saw a modest boost from 0.1% to 0.2% giving cable a temporary lift, but the pair retreated below 1.3150 by mid-morning London dealing.
On the North American docket, the market will get a glimpse of CAD GDP and US PCE data. The Canadian GDP is expected to decline to 0.0% from 0.3% the month prior but if the number turns negative it could send USDCAD soaring. The loonie has been in a rally for the past two days boosted by rising oil prices and relatively hawkish presser from Poloz, but a contractionary print could unwind much of the move as it would put a BOC rate hike in doubt.