Summary:

• Euro jumps substantially after the news that the EU summit in Brussels resulted in a deal on an immigration crisis
• Risk-on again, JPY moves lower despite a set of encouraging macroeconomic data
• US dollar loses steam due to the euro bounce retreating from its crucial level

The shared currency spiked following the news coming from Belgium that the EU summit brought a deal on an immigration crisis, EU Council President Donald Tusk confirmed these revelations in a tweet. They agreed to set up joint asylum processing sites and restrict migrants’ moves with the block. On top of that the leaders shared the same view when it comes to a need to tighten external borders more, and increase financing for Turkey, Morocco and Northern African countries in order to prevent migration to Europe.

This is especially positive news for German Chancellor Angela Merkel who faced an internal issue when she had been given a 2-week deadline to hammer out an agreement aimed at coping with migrants from the south. Therefore, the accord recedes odds for her ousting risking new elections this fall. It needs to be noticed that the deal would have been hard to strike if Italian demands were not met. After overnight discussions Italian PM Giuseppe Conte said that “Italy is no longer alone” alluding to several migrant rescue boats which Italy refused to dock at its ports claiming that all countries across the Mediterranean should take responsibility for them. The euro is gaining 0.7% against the dollar as of 6:41 am BST being, along with the Norwegian krone, the strongest major currency in the morning.

The euro seems to again be escaping from its outstandingly important demand area. A quick look at the chart above allows us to spot that the pair could have drawn a possible triple bottom increasing odds for a more long-standing reversal in the aftermath. Source: xStation5

Broad strength of the euro is weighing on the US dollar in general as the USD index is trading more than 0.5% lower on the day. The US currency is also the most beleaguered one among its major peers except the Japanese yen also falling as investors have switched into a risk-on mode once again. During the session we were offered some decent macroeconomic readings from the Japan’s economy, and the JPY performance only shows how insignificant the data for the yen is as it is driven almost solely by risk appetite. First and foremost, the jobless rate decreased to 2.2% from 2.5% while the consensus had looked for no change at all. At the same time the job to application ratio ticked up to 1.6 from 1.59 suggesting the Japanese people have more choices looking for a job.

Moreover, inflation gauges from Tokyo beat estimations producing 0.6% in case of headline (up from 0.4%), 0.7% as for core ex. fresh food (up from 0.5%) and 0.4% for ’super core’ stripping out both fresh food and energy (up from 0.2%). The data was for June, and even as all readings managed to smash expectations it is well too early to say inflation in the whole country is coming back. Finally industrial output for May (preliminary) came in at -0.2% mom being above an expected -1% mom as well. Beside economic readings the Bank of Japan decided to cut its JGBs purchases for securities due in 5 to 10 years to 410 billion JPY from 430 billion JPY previously. As of the end of March the BoJ owned as much as 41.8% total outstanding Japanese bonds.

Is it another try to push the US dollar index lower? 95 has so far been a really hard nut to crack for bulls, hence a pullback from the current levels still seems on the cards. Source: xStation5