Forex news from the European morning session - 2 July 2019
Headlines:
- SNB's Zurbruegg: We have seen some nervousness and pressure on the franc
- IMF chief Lagarde the latest name thrown into the hat to succeed Draghi as ECB president
- ECB's Lane: Negative rates are temporary, will last 'for a while'
- Saudi oil minister says OPEC has agreed on draft cooperation charter with OPEC+
- ECB policymakers reportedly see no need to rush into July rate cut
- RBA's Lowe: Central bank is prepared to adjust interest rates again if needed
- UK June construction PMI 43.1 vs 49.2 expected
- DIHK survey shows German firms abroad at most downbeat about outlook since 2015
- Germany May retail sales -0.6% vs +0.5% m/m expected
- RBA cuts cash rate by 25 bps from 1.25% to 1.00%
Markets:
- AUD leads, NZD lags on the day
- European equities mixed; E-minis down 0.1%
- US 10-year yields down 0.5 bps to 2.019%
- Gold up 0.6% to $1,392.42
- WTI down 0.2% to $58.97
- Bitcoin down 3.9% to $10,078
The session kicked off with the RBA cutting its cash rate as expected, reducing it from 1.25% to 1.00%. The aussie whipsawed a little on the decision as the central bank left the door open for more rate cuts but added a pause button in the form of a subtle change to its forward guidance as seen below:
June:The Board will continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy and the achievement of the inflation target over time.
July:The Board will continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time.
AUD/USD fell to a low of 0.6959 before recovering to 0.6985 and slowly pushed towards session highs now just under 0.7000 as RBA governor Philip Lowe reaffirmed the "if needed" message in his speech in Darwin.
The dollar held slightly weaker for the most part as markets continue to digest the aftermath of the recent US-China trade truce. Equities remained sluggish and near flat levels, similar to Treasuries so that isn't giving markets much direction today.
EUR/USD held around 1.1290 for the most part before an ECB report suggesting no rate cut is imminent helped push the pair to a high of 1.1321. However, all the report did is reaffirm market sentiment/pricing of a move in September and the euro fell back against the dollar towards 1.1290 levels currently.
The pound held softer with cable slipping to a low of 1.2606 from 1.2630 levels at the start of the London morning as poor UK data weighed on the quid yet again. The pair is recovering some poise though as it crawls back up to 1.2620-30 now.
Meanwhile, the yen is also posting modest gains with USD/JPY hovering around 108.20-30 levels during the session as European bonds rallied early on before giving back some of the gains after the ECB report noted above.
