Forex news from the European morning session - 14 August 2019
Headlines:
- UK PM Johnson: EU is not compromising at all on Brexit deal
- German government spokeswoman: Currently no need for stimulus package
- US MBA mortgage applications w.e. 9 August +21.7% vs +5.3% prior
- It's finally here... US 2s-10s falls below 0 bps for the first time since 2007
- UK beats the US to the yield curve inversion party
- Eurozone June industrial production -1.6% vs -1.5% m/m expected
- UK July CPI 0.0% vs -0.1% m/m expected
- What are Fed funds futures saying now after Trump's tariffs delay?
- Bund yields hit fresh record low as German economy shrinks in Q2
- Germany Q2 preliminary GDP -0.1% vs -0.1% q/q expected
- China reportedly sticking to September trade talks after US tariffs delay
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
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:
- China industrial production fell to its weakest annual pace in over 17 years
- German Q2 GDP contracted, threatening a recession this year
- UK yield curve inverts for the first time since 2008
- US yield curve inverts for the first time since 2007
