ForexLive European morning FX news wrap: Risk turns around as markets tread with light optimism
Forex news from the European morning session - 16 May 2019
- Brexit: There will be more talks between government and Labour in the coming days
- Huawei says that US restrictions will put the country behind on 5G deployment
- Eurozone March trade balance €17.9 billion vs €19.4 billion expected
- Bundesbank's Weidmann: Domestic inflation is 'stubbornly low'
- China says will never make concessions in important matters of principle
- China says will have to take necessary countermeasures if US presses along on trade
- Japan's Hagiuda: Should assess a range of data before deciding to raise sales tax
- Japanese government reportedly considering to revise down economic assessment in May
- CAD leads, GBP lags on the day
- European equities higher; E-minis up 0.4%
- US 10-year yields up 1.1 bps to 2.384%
- Gold down 0.2% to $1,294.15
- WTI up 1.1% to $62.72
- Bitcoin down 3.1% to $7,915
It's been a case of shifting risk sentiment in the European morning as markets turn fear into greed, with risk assets rebounding after an initial setback to start the day. There wasn't much on the economic calendar so plenty of focus remained on US-China trade tensions, particularly after the US announced sanctions against Huawei overnight.
USD/JPY held lower around 109.40 levels as US equity futures were down by 0.4% as China made headstrong remarks at the start of the session on trade relations with the US. But sentiment quickly reversed thereafter, and continued to pick up throughout the session as we're seeing USD/JPY now trade to highs of 109.67.
This comes on the back of a turnaround in US equity futures to post gains of 0.4% now while US Treasury yields also reversed earlier declines to inch higher on the day. 10-year yields are now up by 1.1 bps to 2.384% after having held near 2.35% earlier in the session.
As optimism/greed seeped in, the loonie benefited with USD/CAD falling from 1.3430 levels to test bids near the 1.3400 handle. The loonie's gains come alongside higher oil prices after US inventory data showed a smaller-than-anticipated build overnight.
The likes of the aussie and kiwi also pared earlier losses with AUD/USD rising from around 0.6900 to 0.6920 levels currently despite sluggish Australian labour market data earlier today. Meanwhile, NZD/USD rose from a low of 0.6545 at the start of the session to now trade near the highs around 0.6570 levels.
The pound is the major underperformer though as cross-party Brexit talks have descended into a political charade and Theresa May's hopes of getting a deal passed in parliament in the first week of June is basically non-existent. Cable fell from 1.2845 to 1.2820 before recovering slightly and then now getting pegged back to trade near lows just above 1.2810.
Looking ahead, it's still a matter of risk sentiment as markets will continue to keep their focus on US-China relations this week. Right now, it's a matter of greed versus fear and Wall Street traders will be next in line to vouch for which side will come out tops as we look to close out the week over the next few sessions.