Forex news from the European morning session - 8 May 2019
Headlines:
- Theresa May said to be close to setting out timetable for her departure
- US MBA mortgage applications w.e. 3 May +2.7% vs -4.3% prior
- Brexit: Government-Labour talks said to be 'near collapse'
- Safety flows return as risk sentiment begins to turn sour
- China said to have backtracked on nearly all aspects of US trade deal last week - report
- Brexit: Is May's time as prime minister almost up?
- Germany March industrial production +0.5% vs -0.5% m/m expected
Markets:
- CHF leads, GBP lags on the day
- European equities lower; E-minis down 0.7%
- US 10-year yields down 2.7 bps to 2.43%
- Gold up 0.4% to $1,289.30
- WTI down 0.2% to $61.30
Market participants had little to work with on the session as headlines were few and far between but the key focus remains on US-China trade talks as both countries are set to meet in Washington tomorrow.
As such, trade tensions continued to weigh on risk sentiment despite a much calmer start to the session. The mood was not helped by a Reuters report citing that China had moved to backtrack on key issues in trade talks last week, which prompted Trump's tariffs threat, and that leaves a slim chance of any concessions being offered in tomorrow's talks.
US equity futures traded flat to begin the European morning but quickly declined after the report and the jitters continued throughout. That saw US 10-year yields fell to a one-month low and USD/JPY declined from 110.15 back to the 110.00 handle again.
The swissie was among the main beneficiaries alongside the dollar on haven flows with USD/CHF seen falling to a low of 1.0169 from around 1.0190 levels earlier. Meanwhile, AUD/USD also slipped towards the 0.7000 handle again from around 0.7020 at the start of the session as risk assets declined.
The pound is the notable loser on the day though as it is also brought down on political uncertainty surrounding May's position and the fact that cross-party Brexit talks continue to lead to nowhere. Cable fell from highs near 1.3080 in early trades all the way to near the 1.3000 handle as price is barely staying afloat ahead of North American trading.
The kiwi is the other laggard as it holds weaker after the RBNZ moved to cut its OCR by 25 bps to 1.50% in Asia Pacific trading. NZD/USD is trading near levels at the start of the session though, around 0.6590.
Looking ahead, it's all about risk sentiment still and the big talking point remains that of the crucial US-China meeting tomorrow. Keep an eye on US equities again for more clues and for currencies, pay attention to a test of the 110.00 handle in USD/JPY today.
