• Trump’s budget
  • Terror attack in UK
  • Exports drive growth in Germany
  • PMIs are flying high

Trump’s first major budget hit lawmaker’s desks this morning, but did little to move the USD. His plan is an ambitious one, promising to balance the federal budget over the next ten years. Proposing $3.6T in spending cuts that hit programs like Medicaid, food stamps, and the Children’s Health Insurance Program, his budget will boost spending on defense and border security. The plan also calls for selling half of US oil reserves which could undermine OPEC’s efforts to stabilize oil prices by cutting production among global producers. The budget is still subject to congressional approval.

Sterling is slightly weaker after a tragic terror attack in Manchester. A suicide bomber detonated a bomb outside a concert, killing 22 people including children. Prime Minister May condemned the attack that “stands out for its appalling, sickening cowardice” and campaigning for the general election has been suspended. ISIS has claimed responsibility, but has offered no evidence behind the claim. It was the deadliest attack in the UK since the 2005 London bombings.

German GDP was confirmed at 0.6% in Q1 from the previous quarter. It was the strongest rate of expansion since Q1 2016 and matched preliminary estimates. Growth was mainly driven by exports which beat expectations, contributing 0.4 percentage points to the topline figure. Combined with slowing imports growth, the net trade balance expanded after declining in the previous quarter.

Further positive readings for the Eurozone’s largest economy: a flash estimate of German manufacturing held fast at more than a six-year high of 56.8 in May. IHS Markit’s PMI survey noted that while output has risen continuously since May 2013, the service sector’s expansion eased to a three-month low, “but remained stronger than the average registered for the first quarter of 2017.” A rosy outlook on future prospects pushed job creation to one of the strongest levels recorded over the past decade. The positivity carried into the broader Eurozone, with the flash PMI for the region also holding steady at a six-month high.

EURUSD: Euro off the highs as positive PMI data fights against a stabilizing USD.

GBPUSD: A tragic terror attack in Manchester has put some pressure on sterling.

AUDUSD: Aussie dollar higher on hopes that OPEC will agree to extending production cuts.

USDCAD: Canadian dollar also boosted by hopes for OPEC to extend production cuts and stabilize oil prices.

USDJPY: The yen gained overnight after a deadly terror attack in the UK, but quickly erased them as the dollar steadied.