Forex news from the European morning session - 12 April 2019
Headlines:
- Bundesbank's Weidmann: Companies holding back investments due to trade-related business uncertainty
- Risk is looking positive but be wary of the potential earnings landmine
- Eurozone February industrial production -0.2% vs -0.6% m/m expected
- China March M2 money supply +8.6% vs +8.2% y/y expected
- Libya's oil chief says renewed fighting could wipe out crude production
- China says stable yuan exchange rate favourable for foreign trade in Q1
- China March trade balance +$32.64 billion vs +$7.05 billion expected
- Germany March wholesale price index +0.3% vs +0.3% m/m prior
Markets:
- AUD leads, JPY lags on the day
- US 10-year yields up 4.3 bps to 2.547%
- European equities higher; E-minis up 0.5%
- Gold up 0.1% to $1,293.69
- WTI up 1.5% to $64.56
Markets were generally steady to begin the morning but got a shot in the arm as risk trades started to gain traction mid-way through. The jump coincided with the release of Chinese credit data, which showed a jump in money supply and credit growth, indicating that local authorities may be scaling back on deleveraging efforts in order to bolster the economy.
I'm not sure if that was the main cause for the decision for traders to flip the risk-on switch but it certainly doesn't hurt sentiment whatsoever.
S&P 500 futures moved up from 0.1% higher to post gains of 0.5% as seen currently. Bond yields also moved higher and we saw currencies respond in similar fashion, with the commodity currencies advancing while the likes of the dollar and yen lost ground.
EUR/USD was already higher in Asian trading on Japanese-linked flows, moving up from 1.1260 to 1.1290. But as the dollar slumped, the pair cracked the 1.1300 handle and trades near the highs now around 1.1310 levels.
USD/JPY slowly inched up as the yen remains the weakest performing major currency, with the pair rising from 111.70 to just under 112.00 currently.
Meanwhile, the likes of the aussie, kiwi and loonie also advanced as markets adopted a more optimistic risk tone ahead of North American trading. AUD/USD in particular is posting solid gains, rising from 0.7125 to highs now around 0.7170.
Of note, AUD/JPY is the key pair to watch today in the currencies space as it looks to break away from its three-month range. The pair is often a risk barometer in markets and for it to seal a technical break today would be significant for the way currencies - and markets - could potentially behave in the coming week as well. The pair now trades above 80.00 for the first time since December last year.
