Forex news for North American trading on May 29, 2019:
- Bank of Canada leaves rates unchanged at 1.75%, as expected
- Richmond Fed manufacturing index (May) 5 vs 7 estimate
- House Speaker Pelosi says she thinks Trump still wants to do infrastructure
- US treasury auctions all $32 billion of seven-year notes at 2.144%
- Special Counsel Mueller: Resigning and formally closing the office
- Irish PM Varadkar: There could be a further Brexit extension in October
Markets:
- Gold up $1 to $1280
- WTI crude down 25-cents to $58.90
- US 10-year yield down 0.5 bps to 2.26%
- S&P 500 down 19 points to 2783
- USD leads, NZD lags
What looked like a mortal wound for several markets was only a flesh wound as optimism returned late and deep losses in stocks, oil and Treasury yields were pared.
The FX market wasn't as volatile but a solid theme of US dollar strength arrived with New York traders and continued for most of the day.
Cable was notable as it fell to a five-day low as now just 20 pips from the May-resignation lows. It rose as high as 1.2672 early in North America but sank into the London fix and hit a session low of 1.2612, just ahead of the May low before a late 15 pip bounce.
EUR/USD was also weighed down and finished the day 25 pips lower. The pair has fallen in three straight days and is now threatening the April-May lows.
Dollar strength even extended to USD/JPY despite the risk off tone. That's in part because US stocks rebounded above the 200-day moving average after a dip below but the main driver was the Treasury market. Yields were 5-6 bps lower and the 10-year fell as low as 2.20% but they came back after a 7-year auction and finished at 2.26% -- just above the lower bound of Fed funds but still 12 bps below 3-month bills.
The Canadian dollar initially sold off to a five month low after the BOC decision but the market wasn't exactly sure what to do with a statement that highlighted plenty of positive domestic news but refused to hint at upgraded forecasts. Later, a U-turn in oil prices helped make the decision easier and USD/CAD fell to 1.3513.
The Australian dollar was also beaten up earlier and hit 0.6904 only to bounce to 0.6918 and close out the day flat.
