Forex news from the European morning session - 3 July 2019
Headlines:
- US MBA mortgage applications w.e. 28 June -0.1% vs +1.3% prior
- Fed's Mester: The most likely outcome is that inflation moves back to 2%
- China reportedly considers buying some US farm products to show goodwill
- UK June services PMI 50.2 vs 51.0 expected
- Eurozone June final services PMI 53.6 vs 53.4 prelim
- Germany June final services PMI 55.8 vs 55.6 prelim
- France June final services PMI 52.9 vs 53.1 prelim
- Italy June services PMI 50.5 vs 50.0 expected
- Spain June services PMI 53.6 vs 52.8 expected
- Japan's output gap falls in Q1 2019 to 1.30% from 1.98% in Q4 2018
- BOJ's Funo: Central bank still sees economy picking up in 2H 2019
- Trump voices displeasure over Iran breaching uranium stockpile limit
Markets:
- AUD leads, GBP lags on the day
- European equities higher; E-minis up 0.2%
- US 10-year yields down 2 bps to 1.953%
- Gold up 0.1% to $1,420.01
- WTI up 0.9% to $56.75
- Bitcoin up 4.5% to $11,192
Markets are a bit mixed in the European morning as risk assets push a little higher during the session amid scant optimism about trade and the global economy. The tilt higher came after a report saying China is reportedly considering purchases of more US agriculture products but I don't see that as being a major part of trade talks to be honest.
That said, AUD/USD found enough conviction to move higher since then and finally broke above the 100-hour moving average and the 0.7000 handle. Right now, the pair holds at 0.7020 but resistance from the 100-day moving average is seen closer to 0.7034.
US equity futures also pushed higher during the session but gains are a bit more measured, though the bond market is sending a different signal. Treasury yields are lower on the day with 10-year yields down by 2 bps to 1.953% currently although they are off the lows of 1.938% seen earlier in the session.
Without confirmation from yields, I'd be a bit skeptical in the move higher by risk assets but we'll see what the session ahead has to offer. With yields looking heavy, USD/JPY holds lower on the day at 107.60-70 levels for the most part in the European morning.
EUR/USD kept a tight range with the pair moving from 1.1290 to 1.1270 before pushing back up to 1.1290 levels now with large expiries (around €4.3 billion) between 1.1290-00 helping to keep price action contained so far today.
The pound endured another poor start to the trading day this week with cable slipping to a low of 1.2557 early on before holding around 1.2570-80 after as we got more poor data from the UK, with the composite PMI reading contracting for the first time since July 2016.
Looking ahead, the attention will turn towards the release of US and Canadian data before traders start paying attention to the US non-farm payrolls report on Friday. It is a US holiday tomorrow (4th of July!) so we could see more cautious tones amid the possibility of more trade headlines to follow during the sessions ahead.
