Session Wraps - Major Forex Headlines wrapped up by trading session

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Forex news for New York trade on May 7, 2021:

Markets:
  • Gold up $16 to $1832
  • US 10-year yields up 1 bps to 1.58%
  • WTI crude flat at $64.67
  • S&P 500 hits record 4328
  • EUR and AUD lead, USD lags

The non-farm payrolls report certainly made for an interesting trading day and the repercussions of the shockingly-soft report will continue to reverberate.

This time, it turns out the first reaction (selling the US dollar) was the right one. It dropped 50-80 pips across the board on the headline but then staged a solid recovery, in part because of questions about seasonal adjustments.

Ultimately though, the market appeared to conclude that the Fed's vote is the only one that counts and this will keep them on the sidelines longer. The dollar then renewed its drop with a vengeance

The bond market tells an interesting story. The US 10-year fell a full 10 bps to 1.46% but then came all the way back to 1.57% to finish higher on the day. Meanwhile, the belly held a bid. One way to look at that is the market is sensing the Fed will stay easy but that ultimately it will be too easy and stoke inflation.

Of course, all of that is way too much analysis for one jobs report, that's a huge outlier compared to months of sparking data.

 The euro took full advantage of the US dollar move, tacking on 100 pips to 1.2181, which is the highest since February.

Cable, meanwhile, remains right at the top of the March/April/May range and will be an interesting spot to watch next week.

The Canadian dollar was really torn on the data. It was softer in Canada but that was due to a lockdown that will end this month (at least I sure hope it does). Before that, Canadian jobs were strong and few doubt they'll bounce back afterwards. Still, loonie traders were weighing that against a potential slowdown in the US and the raging commodity bull market. Ultimately, CAD lost ground against the field but was flat against the dollar.

Have a great weekend.

EUR/USD:
forex news ticker

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Author: Justin Low

Forex news from the European trading session - 7 May 2021

Headlines:

Markets:

  • GBO leads, NZD lags on the day
  • European equities higher; S&P 500 futures up 0.2%
  • US 10-year yields down 0.5 bps to 1.565%
  • Gold up 0.3% to $1,820
  • WTI down 0.2% to $64.60
  • Bitcoin up 1.2% to $56,625

It was a relatively quiet session for the most part as the market is seemingly a little lethargic awaiting the US non-farm payrolls report.

The dollar traded a bit more mixed as the euro gained a little after ECB policymaker Kazaks said hinted at a possible reduction in the pace of PEPP purchases for June. EUR/USD moved up from 1.2065 to 1.2090 but is keeping little changed now closer to 1.2070.

The pound also held steady around 1.3900-20 while USD/JPY is little changed holding just above the 109.00 handle for the time being.

Commodity currencies are the laggards but overall moves are relatively minute during the session, as narrow ranges are prevailing still.

Gold kept with the break above $1,800 yesterday to hold around $1,815-20 but is not doing much else awaiting firmer direction ahead of the weekend.

Similarly, US futures are steady and holding a touch higher while Treasury yields are pretty much flat as all eyes are fixated on the jobs report later.

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Forex news for Asia trading Friday 7 May 2021

It was a sideways sort of session for major FX here in Asia ahead of Friday's Nonfarm Payroll report due for the US (at 1230GMT, see bullets above for previews).

Late in the US afternoon/early Asia the US Federal Reserve released its latest Financial Stability Report (a twice yearly report) which painted an optimistic picture but did not some risks, namely COVID-19 (if efforts to stem the spread should falter) and also elevated asset prices:

  • Should risk appetite decline from elevated levels, a range of asset prices could be vulnerable to large and sudden declines, which can lead to broader stress to the financial system

There was little response in 'risk' markets.

In COVID-19 news, Japan looks set to expand restrictions, while Australian city of Sydney recorded no further new local transmission with a donut day.

On the central bank front the Reserve Bank of Australia published its latest SoMP with upgrades for forecasts but sticking to the 2024 date as the earliest for any rate hike. The Bank has been repeating this date, as recently as Thursday this week in a speech from Dep Gov Debelle so it comes as no surprise (see bullets above).

As referred to above, FX ranges weren't much to speak of, minor movement only. 

Regional equities:

  • Japan's Nikkei +0.3%, Topix +0.4%

  • China's Shanghai Composite +0.21%

  • Hong Kong's Hang Seng +0.50%

  • Australia's S&P/ASX 200 +0.29%

Chinese yuan higher again:

Forex news for Asia trading Friday7May 2021

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Forex news for North American trading on May 6, 2021

The markets are in flux as traders ponder the implications of reopening and the potential for tapers.  

The BOE hinted that they may look to taper later in the year, but not yet. The GBP initially moved higher, but move back down shortly after the fireworks subsided. 

Meanwhile, the CAD dollar continued its move to highs despite lower oil prices. The USDCAD has been trading lower since the BOC decision to taper on April 21 when they DID announce a taper of QE. Today the USDCAD pair traded to the lowest level since September 2017 after cracking below the low from 2018 at 1.22455. The low today has reached 1.2143. The price high on April 21 - the day of the BOC decision - was at 1.2622. Eight of 12 days have been down (with the up days really more sideways vs up). The total tick move to the downside in the pair has been 479 pips in 12 trading days.  

In the US today, Fed's Kaplan - the most hawkish of Fed officials - painted a more detailed picture on why he favors the Fed board to bring forward taper talk.  He cited the increased vaccinations along with more fiscal stimulus.  

His comments helped to push the Nasdaq to a low of -1.05% on the day and it seemed a certainty that the index would close down for the 5th consecutive day.  

However, Fed's Mester and Bostic were a little more Fed mainstream where inflation is not a problem, and late day buying perhaps ahead of the key employment report tomorrow, helped to power the stocks higher into the close. The Nasdaq closed positive for the 1st time in 5 days, the Dow closed higher for the 4th consecutive day, closed at highs and at made a new all-time high price.

In Europe, some late session buying also pushed indices higher. Below are the final numbers for the North American and European indices. 

 US stocks are higher

While the CAD continues to run higher, the BOE hint of taper, initially led to a higher GBP, but the momentum faded fairly quickly and the GBP is trading lower on the day. In fact it is the weakest of the majors.  

The USD is also weaker on the day. 

Looking at the strongest to the weakest of the majors (see table and graphs below), the snapshot near the end of day is showing the CAD as the strongest, while the GBP is the weakest. The USD is just behind the GBP as one of the weakest of the majors.  

The Canada dollar dollars is strongest

In other markets:

  • Spot gold cracked back above the $1800 level and is looking to close up around $28 1.57% at $1814.88.
  • Spot silver had an even bigger day with a $0.82 gain or 3.10% up to $27.30
  • WTI crude futures fell $0.73 or -1.11% to $64.90
  • Bitcoin is closing more toward the session lows after rising as high as $58,400. The digital currency is trading at $55,975, down $900 or -1.59%.  Ethereum which reached a new all-time high of $3610.04, respect to the downside and trades near unchanged at $3466.27.  
In the US debt market, yields traded above and below the unchanged level on the day. The 10 yield each day high of 1.5891% and traded as low as 1.555%. The issue is trading at 1.569% +0.3 basis points near the close.  Below are the highs and lows and changes for the day. The two – 10 year spread is closing near unchanged, reflective of the uncertainty at current levels. Tomorrow's employment report should give treasuries a shove one way or the other.

US yields are little changed
Once again, the US will release their jobs report tomorrow with expectations for 1M new nonfarm payroll jobs being added. The employment rate is expected to dip to 5.8% from 6%. The average hourly earnings are expected to come in unchanged versus -0.1% last month. The market might eye that portion of the report for signs of increased wage inflation.  

Canada will also share the spotlight with the US this month as they too will release their April jobs report.  IN contrast to the sharp rebound in the US, the rotations in Canada for a -150K decline in net change in employment after the oversized 303.1K gain last month.

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