Forex news from the European trading session - 16 August 2021

Headlines:

Markets:

  • JPY leads, AUD lags on the day
  • European equities lower; S&P 500 futures down 0.3%
  • US 10-year yields down 1.7 bps to 1.28%
  • Gold down 0.4% to $1,772.74
  • WTI down 1.8% to $67.23
  • Bitcoin down 0.2% to $47,500

The session was bereft of any major headlines but market movement was decent as risk sentiment keeps more on the defensive to start the new week.

Delta variant concerns kicked off last Friday and continued into today with softer data from China, Australia's Melbourne extending lockdown by another two weeks, and Japan set to extend (and expand) state of emergency measures to mid-September.

From a geopolitics perspective, there is an unease surrounding the situation in Afghanistan, though it isn't quite one that has significant reverberations for the market.

Treasury yields were pressured early on, with 10-year yields dragged down to 1.248% but the drop stalled as yields moved back up a little in European trading. 10-year yields are now seen at 1.280% but are still holding lower on the day.

Meanwhile, equities are erring to the side of caution as European indices and US futures are marked lower throughout the session so far.

That is helping to see the yen post a modest gain, with USD/JPY inching lower to 109.27 at the lows today before keeping around 109.30-40 currently.

The dollar is also holding firmer as it starts to gain slightly ahead of North American trading, notably against the euro, pound, and commodity currencies.

EUR/USD is seen slipping to 1.1772 now from around 1.1780-90 levels earlier, where it stuck around for large parts of European morning trade.

USD/CAD is now up 0.4% to 1.2558 and hovering at the highs, not helped by the gloomier risk sentiment and drag in oil prices. Elsewhere, AUD/USD is marked down to the lows for the day and down 0.6% to 0.7326 from 0.7340 levels earlier.

It's all about the risk mood at the moment and the market is leaning towards a more cautious/defensive step, one that looks to be taken in order to reassess the outlook over the next few weeks with regards to the global recovery.

The US retail sales data release tomorrow will be a key litmus test, not to forget the anticipation going into Jackson Hole next week.