Forex Today witnessed a cautious start to a brand new week in Asia this Monday, as the risk-sentiment soured on fresh German political chaos after the country’s Interior Minister Seehofer threatened to quit, casting a cloud on Merkel’s future as the Chancellor. The risk-off tone persisted also due to a sharp sell-off in oil prices, as markets digested the weekend’s tweet by the US President Trump and amid prospects of higher output from Saudi Arabia.
The Asian markets followed suit, with the Japanese Nikkei 225 index dropping the most, in turn offering some respite to the JPY bulls. The USD/JPY pair faded its uptick above the 111 handle and returned to the 110.80 region amid resurgent demand for the safe-haven Yen, as markets shrugged-off mixed Japanese second-tier macro news.
Amongst the Antipodeans, the Aussie was the weakest amid dismal Chinese PMI while the Kiwi defended gains near 0.6775 levels. The Mexican Peso emerged the strongest after the exit polls showed the leftist outsider Andres Manuel Lopez Obrador won the Mexican presidential election. Meanwhile, both the EUR and GBP traded with moderate losses with looming German and UK political concerns.
Main topics in Asia
Trump tweets that Saudi Arabia is in agreement about need to increase oil production
Over the weekend, US President Donald Trump tweeted that King Salman of Saudi Arabia agreed to increase oil production by 2 million barrels per day (bpd), “because of the turmoil & dysfunction in Iran and Venezuela”, according to Trump’s tweet.
German coalition fracturing over immigration issues, Seehofer seeking to resign – AFP
According to the AFP News Agency, party sources from within the German leading coalition have stated that German Interior Minister Horst Seehofer is seeking to resign from his post as Germany’s Interior Minister.
UK PM May putting pressure on Brexiteer ministers – The UK Times
As reported by The UK Times, UK Prime Minister Theresa May has begun to apply pressure to Brexiteer ministers within the parliament, as the odds of a successful deal with the EU leadership in Brussels are beginning to look grim.
China’s Caixin Manufacturing PMI a tad weaker at 51.0 in June, misses estimates
China’s June Caixin manufacturing PMI came in at 51.0 vs. 51.1 expected and 51.0 last, despite the output rising at the quickest rate for four months in June.
New Zealand Treasury: Early indicators for June quarter consumption look soft
New Zealand’s Treasury is out with its monthly economic indicators report for the month of July, with the key highlights found below “¦
USD/MXN: Mexican Peso rallies 1% on politics
After Friday’s temporary reversal, the USD/MXN pair resumed its bearish momentum in Asia this Monday, as the Mexican Peso rallied hard after Mexico’s ruling party Meade conceded defeat in the presidential election.
Reuters news is quoting election authority as saying that quick count shows Lopez Obrador is ahead with between 53% and 53.8% of votes.
Key Focus ahead
The macro calendar for today remains quite eventful, with a raft of final manufacturing PMI reports to be released from across the Euro area economies, followed by the key UK manufacturing PMI release, which is expected to come in at 53.5 in June versus 54.4 previous.
Also, of note will be the Eurozone PPI and jobless rate figures, although they will have virtually no impact on the Euro, as the sentiment around the German political climate will continue to drive the EUR markets in the session ahead.
In the NA session, all eyes will remain on the US ISM manufacturing PMI alongside the Markit PMI release among other minority reports. However, thin trading will prevail on the back of Canada Day holiday.
EUR/USD recoils from Friday’s bull run ahead of the European Manufacturing PMIs
The lack of unity within Germany’s leading party is shaking confidence in the EUR, and traders are balking as Germany’s Chancellor Merkel struggles to keep her ruling party intact. Monday is Markit PMI day, with a range of EU countries’ Manufacturing PMIs dropping today.
GBP/USD: Daily RSI divergence seen ahead of UK manufacturing PMI release
The bullish RSI divergence seen in the daily chart indicates the sell-off from the April 17 high of 1.4377 has likely ended. A better-than-expected UK manufacturing data could bolster the early signs of bull reversal.
RBA probability in outcomes: Probability Neutral (80%) – TDS
Analysts at TD Securities, (TDS), offer scenarios for this week’s RBA.
The key events for the week ahead: eyes on nonfarm payrolls – Nomura
Analysts at Nomura offered a preview of the week ahead’s key scheduled events.
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