Sterling stabilized a bit after the post UK election sharp fall. After suffering the election backslash and losing majority in the parliament, Prime Minister Theresa May visited the Queen at Buckingham Palace to get permission to form a new government. May emphasized that "what the country needs more than ever is certainty" and "now, let’s get to work". The Conservatives is now expected to form coalition with Northern Ireland’s Democratic Unionist Party. And both parties reached consensus to keep May in the position for now. But overall, May’s political survival remains in question. And, there are five candidates identified who could fill the role of Prime Minister, including Boris Johnson, Philip Hammond and David Davis.
Released from UK today, trade deficit narrowed to GBP -10.4b in April. construction output dropped -1.6% mom in April. Industrial production rose 0.2% mom, dropped -0.8% yoy in April. Manufacturing production rose 0.2% mom, 0.0% yoy in April. NIESR GDP estimate rose 0.2% in May.
EU officials showed impatience regarding Brexit negotiation
EU official showed some impatience on the situation of Brexit negotiation after UK election. European Commission President Jean-Claude Juncker said that the can "open negotiations tomorrow morning at half-past nine." Therefore, they are "waiting for visitors coming from London". Juncker hoped that "we will not experience a further delay in the conclusion of this negotiation." EU President Donald Tusk said that "we don’t know when Brexit talks start" but "we know when they must end". Hence "do your best to avoid a no as a result of no negotiation". Meanwhile, EU’s Brexit negotiator Michel Barnier said that "Brexit negotiations should start when UK is ready; timetable and EU positions are clear."
Released from Eurozone, German trade surplus widened slightly to EUR 19.8b in April.
CAD lifted by job data
Some strength is seen in Canadian dollar in early US session on solid job data. The employment market grew 54.5k in May, well above expectation of 17.0k. Unemployment rate rose 0.1% to 6.6% in May. Nonetheless, the Loonie is standing on shaky ground as weakness in oil price persists. WTI dipped to as low as 45.27 earlier today before recovering to 45.70. Near term support at 43.76 is still what the WTI is targeting at. Also from Canada, capacity utilization rate rose to 83.3% in Q1.
Elsewhere, Japan M2 rose 3.9% yoy in May. China CPI accelerated to 1.5% yoy in May, PPI slowed to 5.5% yoy. Australia home loans dropped -1.9% in April.
GBP/USD Mid-Day Outlook
Daily Pivots: (S1) 1.2912; (P) 1.2944; (R1) 1.2982; More…
Intraday bias in GBP/USD remains on the downside as the decline from 1.3047 is still in progress for 1.2614 key support level. We’re favoring the case that whole consolidation pattern from 1.1946 has completed at 1.3047 already. Decisive break of 1.2614 should confirm this bearish view. In such case, larger down trend should be resuming for a new low below 1.1946. On the upside, break of 1.2977 resistance is now needed to indicate completion of the fall from 1.3047. Otherwise, outlook will remain bearish in case of recovery.
In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. The rejection from 55 week EMA is maintaining bearishness in the pair. Also, at this point, as long as 1.3444 resistance holds, fall from 1.7190 is still expected to continue. Break of above mentioned 1.2614 support will affirm this bearish case.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:50 | JPY | Japan Money Stock M2+CD Y/Y May | 3.90% | 4.30% | 4.30% | 4.00% |
| 01:30 | CNY | CPI Y/Y May | 1.50% | 1.50% | 1.20% | |
| 01:30 | CNY | PPI Y/Y May | 5.50% | 5.70% | 6.40% | |
| 01:30 | AUD | Home Loans Apr | -1.90% | -1.00% | -0.50% | |
| 04:30 | JPY | Tertiary Industry Index M/M Apr | 1.20% | 0.50% | -0.20% | -0.30% |
| 06:00 | EUR | German Trade Balance (EUR) Apr | 19.8B | 20.3B | 19.6B | |
| 08:30 | GBP | Industrial Production M/M Apr | 0.20% | 0.70% | -0.50% | |
| 08:30 | GBP | Industrial Production Y/Y Apr | -0.80% | -0.30% | 1.40% | |
| 08:30 | GBP | Manufacturing Production M/M Apr | 0.20% | 0.80% | -0.60% | |
| 08:30 | GBP | Manufacturing Production Y/Y Apr | 0.00% | 0.70% | 2.30% | |
| 08:30 | GBP | Construction Output M/M Apr | -1.60% | 0.40% | -0.70% | |
| 08:30 | GBP | Visible Trade Balance (GBP) Apr | -10.4B | -12.0B | -13.4B | |
| 12:00 | GBP | NIESR GDP Estimate May | 0.20% | 0.20% | ||
| 12:30 | CAD | Capacity Utilization Rate Q1 | 83.30% | 82.40% | 82.20% | |
| 12:30 | CAD | Net Change in Employment May | 54.5K | 17.0k | 3.2k | |
| 12:30 | CAD | Unemployment Rate May | 6.60% | 6.60% | 6.50% | |
| 14:00 | USD | Wholesale Inventories Apr F | -0.30% | -0.30% |
