Forex news from the European morning session - 10 July 2019
Headlines:
- US MBA mortgage applications w.e. 5 July -2.4% vs -0.1% prior
- Secret recording reveals how Russia tried to funnel oil money to Salvini's Lega party - report
- European Commission warns of rising downside risks as it cuts euro area economic outlook
- UK May visible trade balance -£11.5 billion vs -£12.6 billion expected
- UK May GDP +0.3% vs +0.3% m/m expected
- Italy May industrial production +0.9% vs +0.2% m/m expected
- France May industrial production +2.1% vs +0.3% m/m expected
- China's auto market to post negative growth this year amid consumption worries
- What are markets pricing in for the Fed as we await Powell's testimony later today?
Markets:
- CHF leads, NZD lags on the day
- European equities mixed; E-minis down 0.2%
- US 10-year yields up 3.5 bps to 2.10%
- Gold down 0.2% to $1,395.24
- WTI up 2.3% to $59.13
- Bitcoin up 5.2% to $13,042
Major currencies remain in a steady state of flux in anticipation of Fed chair Powell's testimony later today. Markets are hoping for more clues from Powell before committing to any firm moves during the week and trading so far today is not much different.
The dollar is holding steady after some slight weakness early on, brought about amid rising bund yields and light positioning flows. EUR/USD rose to a high of 1.1230 from 1.1210 before settling around 1.1215-20 currently.
Meanwhile, the pound fell to a low of 1.2444 early on in the session as EUR/GBP took a peek above the 0.9000 handle but the quid regained some poise with cable testing a high of 1.2495 before retreating to near 1.2470 currently - unchanged levels.
Commodity currencies also traded in a subdued manner, with risk offering little direction to market participants today. NZD/USD had a quick pop lower in Asian trading to 0.6568 on a large sell order before recovering to stick around 0.6590-10 levels in Europe.
Although Treasury yields are ticking higher on the back of weaker bonds in Europe, USD/JPY is failing to gather enough conviction to break above the 109.00 handle as price rests between 108.85-95 for the most part on the session.
It's all about the anticipation towards Powell's testimony in hopes that he will provide some clues to markets to react. Right now, a 25 bps rate cut is all but baked in but the question is will Powell offer more or less for markets to work with later on today.
I reckon he'll stick with trying to spell out an "insurance rate cut" through complex wording without committing to a 50 bps rate cut or a possible start to an easing cycle. That will keep markets guessing a little and we'll have to see how economic data develops over the coming weeks. After all, the Fed always punts.
Do be reminded that Powell's testimony will be released at 1230 GMT before he is slated to begin testifying at 1400 GMT today.
