Forex news for North American trading on July 2, 2019:
- EU leaders nominate Ursula Von Der Leyen as EU Commision President
- EU leaders agree to appoint Christine Lagarde as next ECB President
- BOE's Carney: Global trade tensions increase downside risks
- EU Foreign Ministers: Extremely concerned that Iran has exceeded stockpile limit for low enriched uranium
- Fed's Mester: A further decline in inflation would be problematic
- Vice President Pence ordered to return to Washington for emergency
- Fed's Mester: I would prefer not to cut rates proactively
- White House's Navarro: We're headed in a very good direction on China
- ISM New York June business conditions 50.0 vs 48.6 prior
- Markit Canada June manufacturing PMI 49.2 vs 49.1 prior
Markets:
- Gold up $29 to $1413
- WTI crude oil down $2.73 to $56.35
- US 10-year yields down 4.8 bps to 1.945%
- S&P 500 up 9 points to 2973
- JPY leads, GBP lags
Chistine Lagarde got the nod as the ECB nominee after days of horse trading that also gave Germany's defense minister the EU Commission Presidency. The euro initially ticked a handful of pips lower on the announcement but it's tough to predict how she will set policy and what the fallout will be. Tusk said it could be a difficult confirmation process.
The euro tried to test the European highs once again in New York trade but the rally fizzled at 1.1312 and tracked towards a session low of 1.1285 late.
The US dollar wasn't broadly stronger. US Treasury yields are falling once again and the trade truce bounce has evaporated now with 10s just a fraction of a basis point from a cycle low. That pulled USD/JPY down to 107.80 from 108.25 and closed the week-opening gap.
The main headlines on the day came from Carney as he took a familiar approach and started to tap trade uncertainty as a negative drag. The market immediately shifted BOE odds to a 50% chance of a cut before year end from 26% yesterday. The UK 10-year yield also fell below the BOE benchmark in the first inversion in a decade.
That move from Carney was also further evidence of a global easing cycle and gold took notice with a two-stage rally to $1414. The rebound shows that gold passed the retracement test as the old range held without really being challenged.
USD/CAD slipped down 1.3100 from 1.1330 at the start of the day. Canada returned from a holiday and that likely had something to do with it because the loonie wasn't getting any help from the 5% drop in crude.
