Euro Lifted by Hawkish Comments From ECB Officials

Market Reviews

The euro strengthened and reached a 2-week high of $1.1775. The single currency was supported by statements of the head of Germany’s central bank, Jens Weidmann, and the ECB chief economist, Peter Praet. They hinted that end to the QE program could be possible by December. The decision about completion of the QE program will probably be taken at next week’s ECB policy meeting. ECB governing council member Klass Knot also reiterated that the central bank should wind down the asset purchase program as soon as possible. The politicians also expressed confidence about gradual growth of the Eurozone inflation.

Australian Dollar remains the strongest one, riding on today’s better than expected GDP data. Canadian currency is also strong. Meanwhile, the US dollar and Japanese yen are the weakest one, followed by Swiss Franc.

Eurozone retail PMI grew to 51.7 in May (a 3-month high), indicating higher monthly sales. German retail PMI increased to 55.5 and marked a 13-month high. France retail PMI grew to 3-month high at 50.7. Italy retail PMI stayed in contraction at 47.3. Swiss CPI rose 0.4% mom, 1.0% yoy in May, above expectation of 0.0% mom, 0.8% yoy. Core CPI rose 0.1% mom, 0.4% yoy. Domestic products CPI rose 0.2% mom, 0.4% yoy. Imported products CPI rose 0.8% mom, 2.7% yoy.

US trade deficit narrowed to USD -46.2B in April. Non-farm productivity was finalized at 0.4% in Q1, unit labor costs at 2.9%. Canada trade deficit narrowed to CAD -1.9B in April, building permits dropped -4.6% mom. Australia GDP grew 1.0% qoq in Q1, above expectation of 0.8% qoq. Q4’s figure was also revised up from 0.4% qoq to 0.5% qoq.

It is reported, that Germany, France and Britain sent a letter to US Treasury Secretary and Secretary of State, requesting US sanction exemptions in EU companies in Iran. The letter state that “as close allies, we expect that the extraterritorial effects of US secondary sanctions will not be enforced on EU entities and individuals, and the United States will thus respect our political decisions.” EU expected exemptions on pharmaceuticals, healthcare, energy, automotive, civil aviation, infrastructure and banking companies.