Forex news from the European morning session - 21 May 2019
Headlines:
- UK CBI May trends total orders -10 vs -5 expected
- Chinese state media: Make no mistake, China is not bluffing (on ability to fight back)
- OECD cuts 2019 global economic growth forecast to 3.2% from 3.3% in March
- CBRT announces that it will restart 1-week repo auctions
- Westpac now sees the RBA cutting rates in June
- What are markets pricing in for a rate cut at the RBA's June meeting now?
Markets:
- CAD leads, AUD lags on the day
- European equities higher; E-minis up 0.6%
- US 10-year yields up 0.5 bps to 2.421%
- Gold down 0.2% to $1,275.16
- WTI up 0.8% to $63.60
- Bitcoin down 0.8% to $7,946
Markets are in a much calmer mood today as traders start to get settled into the ongoing rift between US and China. Equities are mostly higher but Treasury yields aren't doing very much as we wait on Wall Street for more clues on how to proceed. But for now, cautious optimism is the prevailing sentiment among investors.
In the currencies space, the dollar is holding firm on the day as it advances against the rest of the major bloc. EUR/USD slipped from 1.1160 to hover near lows just under 1.1150 currently. Meanwhile, cable fell from 1.2720 to sit just under the 1.2700 handle now.
With risk tones steady, USD/JPY inched higher from 110.10 to hold near highs around 110.30 now ahead of US trading.
The Canadian dollar is the standout performer as the loonie is buoyed by higher oil prices on the day, with USD/CAD slipping from 1.3430 to near 1.3410 currently.
On the flip side, the major laggard is the Australian dollar after RBA governor Philip Lowe laid out the groundwork for a rate cut in two weeks' time, sending AUD/USD lower from 0.6900-10 levels to a low of 0.6870. Inadvertently, the kiwi has also been dragged lower as a result with NZD/USD falling from 0.6530 levels to near the 0.6500 handle.
Looking ahead, the focus of markets will remain on risk sentiment for the most part but we are seeing traders start to focus on individual themes with regards to certain currencies so that could help branch into further opportunities later in the week.
For the euro, the focus will be on EP elections and PMI data. For the pound, the focus will be on Brexit and May's WAB. For the aussie, the focus will be on the RBA meeting on 4 June. As such, markets may start to chase after these themes and detach slightly from the US-China rhetoric so let's hope for more volatility and action to come.
