Forex news from the European morning session - 2 August 2019
Headlines:
- The entire German sovereign yield curve switches over to negative territory
- UK July construction PMI 45.3 vs 46.0 expected
- China on future trade talks: The ball is in US' court, they must show sincerity
- Switzerland July manufacturing PMI 44.7 vs 47.5 expected
- BOE's Carney: A no-deal Brexit economic shock will be instantaneous
- China says if the US is going ahead with tariffs, then there will be countermeasures
- Switzerland July CPI -0.5% vs -0.4% m/m expected
- Germany 10-year yields fall to fresh record low as bond rally extends to Europe
- ICYMI: Boris Johnson's working majority gets cut to just one
Markets:
- CHF leads, NZD lags on the day
- European equities lower; E-minis down 0.3%
- US 10-year yields down 4.3 bps to 1.85%
- Gold down 0.6% to $1,437.05
- WTI up 2.6% to $55.33
- Bitcoin up 1.0% to $10,517
Markets remain in a more defensive mood for the most part in the aftermath of Trump announcing fresh tariffs against China overnight. Haven flows dominated proceedings with the exception of some correction in the commodities space (gold and oil).
Equities remain on the back foot with bonds stealing the show as European bonds rallied sharply, pushing the entire German sovereign yield curve into negative territory while also weighing on Treasury yields during the session.
China's response in saying that they will retaliate also didn't offer much optimism but for now, trade negotiations appear to still be on the table at the very least.
As such, USD/JPY is weighed lower from 107.10 to 106.80 during the session while EUR/CHF plunged further below the 1.1000 handle to 1.0930 levels amid safety flows. The dollar is a little on the back foot on mixed sentiment with the US jobs report in focus soon.
EUR/USD moved higher from 1.1080-90 to 1.1115 before falling back to the 1.1100 handle after facing resistance from the 100-hour moving average. Meanwhile, cable fell to a low of 1.2091 early on before recovering to trade around 1.2115-30 currently.
Commodity currencies are on the back foot as traders remain more cautious with the kiwi leading losses, while it was a familiar story for AUD/USD as it wiped out early gains and looks on course for to finish the day on a 11-day lose streak.
The pair fell from 0.6810 to 0.6790 as the risk mood gets tempered with during the session. USD/CAD traded more steadily around 1.3215-30 with the loonie caught between risk-off sentiment and higher oil prices on the session.
Looking ahead, the focus turns to the US jobs report release at 1230 GMT but expect the more cautious tone in markets to prevail following Trump's announcement yesterday.
That will see some mixed tones ahead of the close today before markets get a better handle next Monday on all the central bank and trade rhetoric we have seen this week.
