Forex news for North American trading on May 7, 2019:
- March US JOLTS job openings 7488K vs 7350K estimate
- Canada April Ivey PMI 55.9 vs 54.3 prior
- Iran and EU are close to deal to allow Iran to sell oil - report
- May's team gloomy about the chances of a deal with Labour
- US March consumer credit outstanding +$10.28B vs +$16.0B expected
- US sells $38B of 3-year notes at 2.248%
- BOE Haldane is speaking in Sheffield but does not comment on BOE policy
- UK's Lidington: UK will hold European Parliament elections on May 23
- Fed's Clarida: Sees temporary factors in recent soft inflation
Markets:
- Gold up $4 to $1284
- US 10-year yields down 2.3 bps to 2.44%
- WTI crude down $1.11 to $61.15
- S&P 500 down 58 points to 2874 -- largest drop since March 22
- JPY leads, CAD lags
The news that drove today's price action didn't hit in North American trading today, rather it was late yesterday when Mnuchin and Lighthizer doubled down on promises of increased tariffs. The jitters weren't bad at the start of the day with S&P 500 down 25 points but the worries accelerated and stocks fell as much as 66 points before a rebound in the final few minutes of trading.
It was the same story in FX and bonds but to a much smaller degree. The US curve moved down 1-2 bps and yen crosses fell around 0.5%. USD/JPY started US trading down slightly at 100.66 but slowly dipped to 100.17 to finish 50 pips lower. Importantly, Monday's early low was breached but strong support remains at 100.00.
EUR/USD ran into selling after the London close and quickly fell to 1.1170 from 1.1190 but recovered later to finish down only a dozen pips. In past tariff episodes the euro has held its ground and it was no different today. However my expectation is that if/when the US wraps up a deal with China, it will hit the EU with tariffs.
Cable struggled as all the optimism about a Labour-Conservative deal fades. Both sides are far too dug in to compromise even after poor results in local elections. Both parties struggled but Labour appears to be prepared for a a war of attrition.
The Australian dollar spiked higher after the RBA held rates but gave it all back on risk aversion. AUD/USD hit 0.7048 on the decision but grinded down to 0.7000 in North American trade.
USD/CAD was also in focus with oil prices falling sharply, then bouncing and consolidating. The risk trade also factored in and ultimately the pair closed up a quarter-cent.
The kiwi will be in focus next with the market pricing in a 40% chance of an RBNZ cut at 0200 GMT.
