Forex news from the European trading session - 6 July 2018
Headlines:
- Japan lowers FY2018 real growth forecast to 1.5% from 1.8%
- Iran says it is fully prepared for a collapse in the nuclear deal
- China premier Li says that trade war is never a solution
- Istat says that it sees the Italian economy slowing in the coming months
- China said to have applied tariffs to same value of US goods at the same rate - report
- Italy May retail sales +0.8% vs +0.5% m/m expected
- UK June Halifax house price index +0.3% vs +0.2% m/m expected
- China's foreign ministry says that tariffs have been implemented on some US goods
- Switzerland June foreign currency reserves CHF 748.5 bn vs CHF 740.9 bn prior
- France May trade balance -€6.00 bn vs -€5.05 bn expected
- Australia June foreign reserves AUD 75.8 bn vs AUD 82.5 bn prior
- Germany May industrial production +2.6% vs +0.3% m/m expected
- Japan May preliminary leading indicator index 106.9 vs 106.6 expected
Markets:
- NZD leads, CAD lags on the day
- European equities mixed, mostly flat
- Gold down 0.30% to $1,54.04
- WTI crude down 0.74% to $72.40
- US 10-year yields flat at 2.83%
- Bitcoin up 0.14% to $6,517
It's been an eventful session if you're trading risk, but in the currencies space the main focus is all on the US jobs report that is to come later at 1230 GMT. As US tariffs on Chinese goods kicked in to effect at 0400 GMT, the market responded with a relief rally across the equities space.
US equity futures inched higher at first, and Asian stocks followed suit thereafter when Chinese markets reopened after the lunch break. The sudden jump in equities also saw risk assets elsewhere bounce higher as the aussie and kiwi got bid on the back of that too.
The positive tones transferred to European trading with the dollar and yen mostly on the back foot early on. But then came a couple of reports saying that China has imposed retaliatory tariffs on US goods as soon as the US tariffs came into effect. The report was then revised to say that it hasn't, but thereafter the Chinese foreign ministry confirmed it and during the back and forth we saw equities started feeling a little heavy.
The European cash equity market opened a little higher, but those gains were quickly reversed as US equity futures turn negative and European stocks became flat and continued that way throughout the session. Bond yields also erased gains on the day following the change in mood.
But despite the shift in risk sentiment, the aussie and kiwi held on to their gains and the yen is still trading sideways for the most part with currency traders having their eyes on the US jobs report more than anything else.
And that was pretty much it for the session as now the market awaits the US non-farm payrolls and labour market report later on.
Looking at individual currencies, EUR/USD moved higher as the dollar fell early on to a high of 1.1727 before retreating to stick close to the 1.1700 handle - where large expiries also sit, keeping an anchor on the pair.
GBP/USD also benefited a little from the dollar's track lower to move to a high of 1.3253 before settling between 1.3220-30 levels now.
AUD/USD gained early on and steadily moved higher to touch 0.7418 but ran into resistance at the top but continues to trade around the highs ahead of the job report. A similar story can be observed for NZD/USD as the pair moved to a high of 0.6827 earlier and stayed around there currently.
As for USD/CAD, the pair is still trading in a narrow range and was following the dollar's movement earlier on but oil prices continue to decline and that is keeping the loonie at the bottom of the pile heading into US trading.
