ForexLive European morning FX news wrap: US and UK yield curves invert

Author: Justin Low | Category: News

Forex news from the European morning session - 14 August 2019

Headlines:

Markets:

  • JPY leads, AUD lags on the day
  • European equities lower; E-minis down 0.9%
  • US 10-year yields down 11.8 bps to 1.586%
  • Gold up 0.8% to $1,513.70
  • WTI down 2.5% to $55.64
  • Bitcoin down 3.7% to $10,479

EOD 14-08
Did someone say ʎᴉǝlp ɔnɹʌǝ?

That is the big story of the session as we saw both the US and UK yield curves invert. The UK pipped the US by a couple of minutes but regardless, the headlines sparked a fresh wave of risk aversion across markets as risk assets took a heavy hit and haven demand prevailed.

Markets were already in a more cautious mood to start the morning but as bonds accelerated gains, the inversion story took over and saw the risk-off mood deepen.

USD/JPY fell from 106.40 to 106.10 before finding fresh offers in the past hour to fall below 106.00 to lows around 105.80 currently. This comes amid a massive surge in Treasuries with 10-year yields down by nearly 12 bps on the day now.

Equities are being hammered with European stocks turning gains into heavy losses and US futures are down by over 1% ahead of the open later.

As such, risk currencies are on the receiving end of a beating with the aussie the weakest performer today. AUD/USD was already lower around 0.6775 amid weaker Chinese data but the risk-off mood saw the pair fall lower to under 0.6750 currently.

The euro and pound were more steady as they trade in a narrow range against the dollar for the most part. The latter did push higher with cable rising to 1.2100 before quickly retreating back to 1.2060-70 levels once again as buyers fail to push through offers.

It's all about the risk mood as the bond market takes over. To recap today's headlines:

  1. China industrial production fell to its weakest annual pace in over 17 years
  2. German Q2 GDP contracted, threatening a recession this year
  3. UK yield curve inverts for the first time since 2008
  4. US yield curve inverts for the first time since 2007

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