Forex news from the European morning session - 30 August 2019
Headlines:
- ECB's Nowotny: Buying equities for stimulus isn't an option
- Markets continue to feel more optimistic as we look towards the end of the week
- ECB's Rehn: It is important that ECB continues with rather accommodative policy
- Brexit: Scottish courts still go through with full hearing on 3 September
- Brexit: Scottish court rejects request for interim block on Johnson's move to prorogue parliament
- Eurozone August preliminary CPI +1.0% vs +1.0% y/y expected
- Japan's Motegi: No discussion of currency clause in recent trade talks
- UK July mortgage approvals 67.3k vs 66.1k expected
- China foreign ministry: US-China trade teams are maintaining effective communication
- ECB's Lautenschlaeger: It is much too early for a huge stimulus package
- Germany July retail sales -2.2% vs -1.3% m/m expected
- Ireland's Coveney: There cannot be this notion that the backstop is removed
Markets:
- JPY leads, CHF lags on the day
- European equities higher; E-minis up 0.6%
- US 10-year yields up 2.8 bps to 1.523%
- Gold down 0.2% to $1,525.31
- WTI down 1.4% to $55.91
- Bitcoin up 0.3% to $9,558
There were a couple of things for markets to digest in the European morning today but generally the more optimistic risk mood remains the key takeaway, though that sentiment is not really shared by major currencies for the most part.
Equities were initially tepid and weighed lower amid a drop in HK stocks as it is reported that China had rejected the proposal to withdraw the extradition bill. However, that quickly turned around before risk sentiment got a boost out of more US-China trade remarks.
It was a simple statement on both sides maintaining "effective communication" but markets lapped it up. US futures gradually climbed higher while European equities also rose in tandem as bond yields firmed before easing back a little thereafter.
USD/JPY pushed higher from 106.30 to 106.50 before slipping back to 106.30 levels currently, as major currencies aren't entirely buying into the hopeful optimism above. USD/CHF did rise from 0.9865 to 0.9890 levels though as European equities hold firmer.
The pound also saw some minor action as cable fell from 1.2180 to a low of 1.2160 after Scottish courts rejected an interim injunction to stop Boris Johnson from proroguing parliament. However, the full hearing is still set to take place next week and that saw cable rebound to 1.2190 levels before slipping back to 1.2170 levels currently.
The dollar held more steady throughout the session with EUR/USD seen at one-month lows, moving closer towards a test of the year's low @ 1.1027 despite less dovish commentary from ECB officials since overnight trading.
Looking ahead, it's mainly about the risk mood still as we look to close out the week. I want to say that month-end flows in particular have been in part affecting the moves seen in equities and bonds over the past three days but I reckon we'll only get a better picture of that next week as we'll see if markets can build on the current hopeful optimism.
