Forex news from the European trading session - 23 May 2018
Headlines:
- EU's Dombrovskis says economic growth set to continue this year and in 2019
- UK May CBI retailing reported sales 11 vs 5 expected
- More from Coeure: QE probably won't end abruptly after September
- ECB's Coeure: Not worried about growth slowdown
- OPEC+ is said to discuss changing way to assess oil stockpiles
- RBA's Lowe says that things are moving in the right direction with China
- Di Maio says that Conte 'absolutely' remains the PM candidate
- Japanese government maintains economic assessment for May 2018
- UK April CPI % +0.4% vs +0.5% m/m expected
- RBA's Lowe says China risk is among the largest economic risks to Australia
- Eurozone May flash manufacturing PMI 55.5 vs 56.1 expected
- Germany May flash manufacturing PMI 56.8 vs 57.9 expected
- France May flash manufacturing PMI 55.1 vs 53.7 expected
- April Japan Machine Tool Order YoY 22% vs 22% prior
- France Q1 ILO Unemployment rate 9.2% vs 8.5% expected
- Japan data - March All Industry Activity Index 0.0% m/m (vs. expected at +0.1%)
Markets:
- JPY leads on the day, GBP and CAD lags behind on the day
- European equities all lower, most major bourses down >1%
- Gold up by 0.43% to $1,296.67
- WTI down by 0.64% to $71.74
- US 10-year yields down by 5 bps to 3.01%
- Bitcoin down by 3.13% to $7,854
It started in Asia with the yen gaining for the most part as Trump signaled that he wasn't "satisfied" with the way trade talks are going with China and that there is a "substantial chance" of the North Korea-US summit not taking place.
The backwards progress on both fronts did not help with the risk environment and equities sold off and Treasuries gained a bid. That continued over to European trading as the yen tops the major bloc.
USD/JPY fell to a low of 109.56 on the session - a fall of more than 1.2% - but has since bounced back a little while all other yen pairs are significantly lower on the day too. The second best performing currency on the day is the Swiss franc but even there, it is miles behind the yen in terms of gains.
EUR/CHF is now testing the 1.1600 handle, having broken below the 200-day moving average for the first time since April 2017.
Besides the two haven currencies, the dollar is also markedly higher against the rest of the major bloc. EUR/USD touched just under 1.1700 after PMI prints for France, Germany, and Eurozone disappointed and suggests that the slowdown in Q1 may not actually be transitory.
GBP/USD is also much lower on the day as the sterling suffered from poor economic data once again as UK inflation figures came in lower than expectations. GBP/USD was sent lower from 1.3370 levels to session lows of 1.3347 after the data was released.
Other than that, the usual risk-off tone is moving around with commodity currencies hit but CAD even more so than the AUD and NZD as oil prices are also marked lower on the day with WTI crude down by 0.6% on the day.
It's all about the risk-off tone so far in trading today, with the worries in the market starting to pile up. There's the trade rhetoric between US and China, the potential breakdown in talks with North Korea, Turkey continuing to see a blowup in its currency - potentially leading to EM spillover, the political situation in Italy failing to provide an image of confidence, and of course the whole Iran thing is still not out of the waters just yet.
Put it all in a mix, and that's one unhealthy cocktail for the risk environment in the market. The irony in all of this is that it needed Trump to shine the spotlight on it.
