Investors and forex traders are focused on April labor market data: unemployment remained unchanged at 4.3%, in line with expectations, while the number of new nonfarm jobs increased by 115,000, exceeding the forecast of 65,000. At the same time, average hourly earnings rose by 0.2% instead of the expected 0.3%. Thus, the sector continues to show resilience despite the energy crisis, which significantly increases the likelihood that the U.S. Federal Reserve will keep interest rates unchanged at least until the end of this year. Meanwhile, investors were disappointed by another escalation in the U.S.-Iran conflict, as the sides exchanged attacks in the Strait of Hormuz, damaging port infrastructure and vessels, which may negatively affect the diplomatic settlement process. Later, President Donald Trump attempted to calm markets by saying that consultations would continue and the ceasefire would remain in force. At the same time, traders are concerned about the escalation of the economic confrontation between the U.S. and the EU: on Thursday, the head of the White House announced a new increase in export tariffs, which currently average 15.0%, arguing that the EU is not fulfilling the terms of an already concluded agreement. Implementation by the eurozone has been slow, especially after the Supreme Court ruled that part of the tariffs introduced by the White House were illegal. The deadline for Brussels to ratify the agreement expires on July 4, after which the foreign trade crisis may intensify again.
Eurozone
The euro is strengthening against the yen and the U.S. dollar but weakening against the pound.
In March, German production fell by 0.7% instead of the expected 0.4% growth amid rising energy prices and logistical instability. However, exports increased by 0.5%, while experts had expected a 1.7% decline, and imports rose by 5.1% compared with estimates of 0.8%. As a result, the trade balance surplus narrowed from €19.5 billion to €14.3 billion. The United States remains the largest importer of German goods, with purchases estimated at €11.2 billion, while China supplies the largest volume of goods to Germany, worth €15.6 billion. Meanwhile, European Central Bank (ECB) Executive Board member Isabel Schnabel pointed to a growing share of eurozone companies planning to raise prices for goods and services in the near future despite subdued demand, while household inflation expectations are also rising. According to the official, if the Middle East crisis continues, the regulator may shift to a more hawkish tone to combat price growth.
United Kingdom
The pound is strengthening against the yen, the U.S. dollar, and the euro.
In April, the Halifax House Price Index fell by 0.1% month-on-month against forecasts that it would remain unchanged, and adjusted from 0.8% to 0.4%, exceeding experts’ expectations. Negative dynamics have been developing for the second month in a row, driven by weaker demand due to the deteriorating economic situation amid the U.S.-Iran confrontation. Meanwhile, local government elections have concluded, and according to preliminary data, the ruling Labour Party lost, which could lead to Prime Minister Keir Starmer’s resignation, although he has stated that he does not intend to leave his post.
Japan
The yen is strengthening against the U.S. dollar but weakening against the euro and the pound.
Investors are assessing the April services business activity index, which fell from 53.4 points to 51.0 points, while experts had expected 51.2 points. As a result, the composite indicator declined from 53.0 points to 52.2 points. Thus, the sector that had previously provided significant support to the economy slowed to an 11-month low under pressure from a decline in new orders and higher energy prices. According to Reuters sources, the government carried out currency interventions during the holidays from May 1 to May 6, as liquidity in the financial market is relatively low during this period. It is assumed that officials spent another ¥5.0 trillion, or about $32.0 billion, to stabilize the national currency.
Australia
The Australian dollar is strengthening against the U.S. currency and the yen but is showing mixed dynamics against the pound and the euro.
On Monday at 03:30 (GMT+2), housing market data for March will be released. According to preliminary estimates, the number of permits issued for the construction of private houses may increase by 0.9%, while the overall figure may decline by 10.5%. If the forecast is confirmed, it would point to increasing pressure on the construction sector and raise the likelihood of a slowdown in the national economy, which could prevent the Reserve Bank of Australia (RBA) from tightening monetary policy.
Oil
Oil prices are correcting downward after yesterday’s rise, which was triggered by the escalation of the U.S.-Iran conflict.
As a reminder, the sides exchanged attacks in the Strait of Hormuz, resulting in damage to port infrastructure. However, Iran’s Islamic Revolutionary Guard Corps (IRGC) managed to seize the tanker Ocean Koi, which was sailing without Tehran’s permission. Experts believe that the incident may negatively affect the diplomatic settlement process.
Meanwhile, operations at Libya’s largest active oil refinery, Zawiya, were suspended due to nearby fighting, creating a market deficit of 120,000 barrels of oil per day. Therefore, despite the current decline in prices, fundamental factors supporting growth in “black gold” remain in place.
