Forex news from the European morning session - 16 August 2019
Headlines:
- SNP-Labour cooperation to stop a no-deal Brexit reportedly continues to gain traction
- Germany says a meeting between Merkel and UK's Johnson planned soon
- Equities and bonds are sending the same message today
- Yen pairs begin to follow yields higher on the day
- Eurozone June trade balance €17.9 billion vs €18.5 billion expected
- Markets stay more calm in European morning trade so far
- South Korea says that North Korea likely launched short-range ballistic missiles
- Can markets keep the calm today?
Markets:
- GBP leads, CHF lags on the day
- European equities higher; E-minis up 1.0%
- US 10-year yields up 2.4 bps to 1.55%
- Gold down 0.7% to $1,512.60
- WTI up 1.7% to $55.40
- Bitcoin down 2.9% to $10,070
There weren't any major headlines during the session as markets settled for more calm and relief following the fearful mood since Wednesday. Dark clouds from the "crazy inverted yield curve" are beginning to dissipate as equities rallied while bonds slipped.
As a result, the yen and franc were dragged lower with USD/JPY rising from 106.20 to a high of 106.49 during the session. USD/CHF also climbed back above 0.9800 with European equities posting decent gains during the morning.
The pound was the notable gainer though as the currency benefited from cross-selling in EUR/GBP and a move above key near-term levels in GBP/USD. Cable climbed from 1.2090 to hold near highs now around 1.2160.
Meanwhile, the euro continued its run lower after yesterday's dovish ECB message with EUR/USD slipping from 1.1105 to lows close to 1.1075.
The aussie and loonie also held more firm amid the better risk mood and higher oil prices respectively. Though the kiwi is failing to join in on the party after weaker-than-expected manufacturing PMI earlier (first contraction since 2012).
It's all about the risk mood and I reckon the relief/recovery seen today is in part to do with profit-taking after recession fears were blown out of proportion on Wednesday.
Don't get me wrong. The global economy is still headed towards a period of further weakness but it's not like we're going to see a recession tomorrow or in the next month.
In the big picture, recession fears will continue to linger as we navigate through a shift in the market paradigm. But expect markets to slowly price in those fears over time as global economic data continues to deteriorate. Key word there being 'slowly'.
