The election results from France and Greece over the weekend resulted in a weak start for the EUR as business got underway this morning.
Versus the USD, the EUR opened at 1.3030, some 30 points below Friday’s NY close, but was quickly under more pressure and fell through the key 1.30 mark shortly thereafter. Whereas Hollande’s victory versus Sarkozy was in line with exit polls and not too much of a surprise, it was the developments in Greece that exerted the most pressure on the single currency.
Latest results suggest ruling coalition parties have performed poorly and a growing portion of seats are being won by minor parties broadly opposed to Greece’s bailout conditions and austerity measures. This raised the specter of Greece once more stuck in limbo and reneging on agreed measures/standards. In an early warning, the IMF has commented that if a new Greek government does not stick to agreed measures, then aid payments could be suspended, possibly as early as June. EURUSD traded to a 4-1/2 month low just above 1.2950.
Data releases concentrated on Australia this morning with a mixed bag of results. Retail sales provided the AUD with some support as they rose 0.9 percent m/m, well above the consensus of +0.2 percent and the strongest monthly gain since April last year. In contrast, Australia’s construction industry fell deeper into contraction territory with the PMI dipping to 34.9 from 36.2, its lowest since October last year. This also marked the 22nd consecutive month the index has stayed below the key 50 contraction/expansion threshold. More worryingly, the new orders sub-index fell another 0.9 points to 32.3.
On the business side, NAB’s indicators for business conditions and confidence were mixed. Business conditions fell to zero from a downwardly-revised +3 (note surveys before the RBA 50bp rate cut at the start of this month) while business confidence remained robust, even ticking up to +4 from +3 to its highest in almost a year as businesses looked to much-anticipated interest rate cuts from the central bank. AUD initially weakened to 1.0112 versus the US dollar but hovered in the 25-40 range for the rest of the session.
A disappointing US jobs report had kept risk firmly on the back-burner into the weekend with the EUR pressured through the 1.31 mark versus the US dollar with softer Euro-zone service PMIs adding to the pressure on the single currency. The US economy added a mere 115k jobs in April, well below the anticipated 160k and despite an upward revisions to both February and March’s numbers. The unemployment rate surprisingly dipped to 8.1% from 8.2% but this was explained away by a fall in the labour force, which saw the participation rate hit its lowest level since 1981. Wall St completed its worst week in 2012 after the weak jobs data with energy shares whacked as commodity prices sunk amid a deteriorating global economic outlook.
Data Highlights
US Apr. Change in Non-farm Payrolls out at 115k vs. 160k expected and revised 154k prior
US Apr. Unemployment Rate out at 8.1% vs. 8.2% expected and 8.2% prior
US Apr. Avg. Hourly Earnings out at flat m/m, +1.8% y/y vs. 0.2%/2.0% expected and 0.2%/2.0% prior resp.
US Apr. Avg. Weekly Hours out at 34.5, as expected and unchanged from prior
CA Apr. Ivey PMI out at 52.7 vs. 61.0 expected and 63.5 prior
AU Apr. AiG Performance of Construction Index out at 34.9 vs. 36.2 prior
AU Apr. NAB Business Conditions out at o vs. revised +3 prior
AU Apr. NAB Business Confidence out at +4 vs. +3 prior
AU Mar. Retail Sales out at +0.9% m/m vs. +0.2% expected and revised +0.3% prior
AU Mar. Building Approvals out at +7.4% m/m, -15.0% y/y. 3.0%/-18.0% expected and -8.8%/-15.2% prior resp.
AU Apr. ANZ Job Advertisements out at -3.1% m/m vs. revised +0.7% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
Swiss Unemployment Rate (0545)
Swiss CPI (0715)
EU Sentix Investor Confidence (0830)
GE Factory Orders (1000)
CA Building Permits (1230)
US Consumer Credit (1900)
Andrew Robinson,
SAXO BANK