Forex news from the European morning session - 19 August 2019
Headlines:
- Wilbur Ross: US will delay Huawei ban by 90 days
- Germany reportedly readying up stimulus plan as contingency for deep recession
- ECB's Muller: A decision could come in September on further stimulus
- Bundesbank sees risk of the German economy entering a recession
- BOE's Carney says doesn't see negative interest rates as an option at this stage
- SNB total sight deposits w.e. 16 August CHF 589.3 bn vs CHF 585.5 bn prior
- Macron and Johnson to meet on 22 August over lunch
- Markets are feeling more optimistic to start the week
- Japanese exports continue to highlight the uphill battle faced by the global economy
Markets:
- EUR leads, GBP lags on the day
- European equities higher; E-minis up 1.0%
- US 10-year yields up 5.3 bps to 1.606%
- Gold down 1.3% to $1,494.53
- WTI up 0.5% to $55.12
- Bitcoin up 3.6% to $10,768
Markets appear to be putting behind them the fears caused by the yield curve inversion last week as the relief rally continues ahead of Jackson Hole later this week.
I would still ascribe this to some profit-taking from long bonds/Treasuries in anticipation of a less dovish Fed considering how aggressive markets have priced in the rate outlook.
Equities were more buoyant to kick start the week and only built further momentum during the session as German fiscal stimulus talks also helped to boost European banking stocks.
Meanwhile, Treasury yields soared across the curve and that fed into gains seen in yen pairs in the European morning. USD/JPY climbed from 106.40 to 106.70 with USD/CHF inching back above 0.9800 from 0.9780-90 levels at the start of the session.
The euro held steady for the most part amid more chatter of German spending since the weekend. EUR/USD steadily climbed from 1.1090 to hold around 1.1100 thereabouts.
The rise higher in Treasury yields also fed gains in the dollar as the greenback advanced slightly against the aussie and kiwi.
The pound was the weakest performer as sellers started to come back in after the currency inched higher towards the end of last week. The UK government ruled out any hopes of parliament returning early from the summer recess and that puts a very tight timeline for lawmakers to try and stop a potential no-deal Brexit by 31 October.
Cable rose to a high of 1.2173 early in the session before dropping to a low of 1.2105 and is holding just above that currently.
Looking ahead, it's all about the risk mood still but expect markets to slowly angle the focus towards central bank rhetoric with Jackson Hole being the key risk event for markets later in the second-half of the week.
