Forex news from the European morning session - 7 May 2019
Headlines:
- Fed's Kaplan: Expects US economy to remain healthy, no recession coming
- Optimism from China's Liu inclusion in trade talks fade as risk assets decline
- Brexit: Cross-party talks taking a turn for the better?
- Tusk may propose fast process for filling top EU jobs - report
- China on trade talks: Raising tariffs won't resolve issues
- China's Liu He is to head to US for trade talks
- Germany March factory orders +0.6% vs +1.4% m/m expected
- Political instability continues to hurt the Turkish lira
- Here is how RBA Governor Lowe's Statement changed in May from April
- Full statement of the RBA May monetary policy decision
- RBA leaves cash rate unchanged at 1.50%
Markets:
- AUD leads, NZD lags on the day
- European equities lower; E-minis down 0.6%
- US 10-year yields up 0.7 bps to 2.476%
- Gold down 0.1% to $1,280.45
- WTI down 1.0% to $61.66
- Bitcoin up 3.1% to $5,870
The session started with an early morning move in the aussie as the RBA left its cash rate unchanged despite downgrading its inflation forecast to below its target band of 2% to 3%. With certain market quarters expecting a rate cut, the aussie duly bounced after the decision with AUD/USD rising from 0.7000 to a high of 0.7048.
Market sentiment remained cautious as US-China trade tensions continue to dominate the landscape. The dollar was holding weaker across the board as US equity futures were seen down 0.6% at the start of the European morning.
Risk assets then got a slight boost as China confirmed that vice premier Liu He will be among those attending trade talks in Washington later this week. E-minis pared losses to about 0.1% and that saw USD/JPY jump up from 110.65 to a high of 110.85.
However, the optimism proved to be short-lived and steadily faded as we went about the session. E-minis pared all of the earlier pullback to be 0.6% lower currently while USD/JPY is back to 110.55-65 levels now.
At the same time, the dollar also caught a slight bid to pare losses against the major currencies bloc. EUR/USD slipped from 1.1210 to just under the 1.1200 handle now. Meanwhile, GBP/USD fell from highs of 1.3131 earlier to trade near the lows now around 1.3080.
AUD/USD also pared some of its earlier gains to near 0.7020 currently and we also see USD/CAD rise from 1.3420 to 1.3460 levels now as oil prices also slump alongside risk assets as market optimism begins to fade.
Looking ahead, expect plenty of focus to still rest on US-China trade talks and as such, risk sentiment will continue to play a major role in dictating market movement this week. Thursday is going to be a crucial day in that regard as that is when discussions take place before Trump's tariff threat kicks in on Friday.
