Forex news from the European trading session - 31 May 2018
Headlines:
- Fed's Bullard says US economy is doing 'quite well'
- UK Treasury appoints Jonathan Haskel to BOE's monetary policy committee
- Italy May preliminary CPI +0.4% vs +0.2% m/m expected
- Eurozone April unemployment rate 8.5% vs 8.4% expected
- Eurozone May preliminary core CPI +1.1% vs +1.0% y/y expected
- UK April mortgage approvals 62.5k vs 63.5k expected
- Switzerland April retail sales +2.2% vs -1.8% y/y prior
- Spain Q1 final GDP +0.7% vs +0.7% q/q prelim
- France May preliminary CPI +0.4% vs +0.3% m/m expected
- UK May Nationwide house price index -0.2% vs +0.2% m/m expected
- Switzerland Q1 GDP +0.6% vs +0.5% q/q expected
- Lega may join forces with Fratelli d'Italia in next election - report
- Paolo Savona may be foreign minister in a Lega-Five Star government - report
- Japan April housing starts +0.3% vs -8.9% y/y expected
Markets:
- NZD, CAD leads on the day, USD, JPY lags behind
- European equities higher, only DAX lower
- Gold up by 0.24% to $1,304.55
- WTI down by 0.60% to $67.80
- US 10-year yields up by 1.3 bps to 2.867%
- Bitcoin up by 2.82% to $7,544
The session started with the euro finding a bid once again as Italian bonds and stocks rallied further relative to yesterday's trading. 2-year bond yields fell to a low of 0.79% and that helped to underpin the euro as Five Star and Lega sought to compromise and seek a less euroskeptic government.
Paolo Savona is now reportedly to take up the foreign minister post instead of economic minister as the two parties look to sway Italian president Mattarella to allow them to form a government. But as mentioned, regardless of Savona, if the new government is fiscally irresponsible it would only serve to hurt Italy and the euro hard over the long-run.
After that, we saw inflation figures in the Eurozone beat expectations and that kept the euro underpinned as it bodes well for the ECB to be more confident in its 14 June meeting to position for a stance to normalise policy.
But as BTPs surrendered some gains, so did the euro and EUR/USD broke back below the 200-hour MA to current levels - keeping the mood a bit cautious between buyers and sellers.
Sterling and swissie both benefited from the euro's rise and only gave up a bit of gains thereafter, staying well bid against the dollar. Meanwhile, USD/JPY didn't do much on the day - trading between 108.70 to 108.90 during the session even as stocks rallied.
Asian equities soared while European equities are also following a similar mood, albeit a bit cautious as there is still the whole US-EU trade spat to consider. And that trade spat is what is causing the DAX to fall after news broke out that Trump reportedly told Macron that he wants to close the door to German automakers in the US.
Regardless, commodity currencies stayed underpinned on the day with the kiwi leading the way alongside the loonie. Both came back alive in the last hour as USD/CAD tracked lower following yesterday's decline on the back of the Bank of Canada statement that hinted at a July rate hike.
The aussie is one of the strugglers on the day as AUD/NZD selling helped to pin down the currency. Looking at the chart it's giving me some food for thought. In the last month when risk was struggling, AUD/NZD rose and in the past week and the last two days more specifically as risk improved, the pair fell. Seems like there is an obvious risk correlation bias in the pair at the moment.
