Forex news from the European morning session - 20 May 2019
Headlines:
- Bundesbank says German economy is still weak despite recent pickup
- US-China speculation: China to suspend business with suppliers who agreed to halt supplying Huawei
- SNB total sight deposits w.e. 17 May CHF 578.3 bn vs CHF 578.1 bn prior
- China says 'wait and see' for countermeasures on Huawei case
- Japan's Suga: Q1 GDP report has 'absolutely no impact' on sales tax hike plan
Markets:
- AUD leads, EUR lags on the day
- European equities lower; E-minis down 0.6% (Nasdaq down 1.1%)
- US 10-year yields flat at 2.387%
- Gold flat at $1,277.00
- WTI up 0.4% to $63.01
- Bitcoin up 11.2% to $7,902
Just when you thought markets would be able to shake off some of the negativity from trade tensions last week, things start to turn around again. There was a hint of steadiness as we began the European morning but that quickly went away after speculation came about that China is to retaliate against Huawei measures.
That alongside general sentiment surrounding the Huawei situation saw semiconductors stocks get routed heavily, and risk assets quickly declined thereafter. European stocks began the session with mild losses but that turned into a beat down as most major indices are posting losses well over 1% now.
Meanwhile, US equity futures also pared its earlier advance to slump into negative territory with Nasdaq futures bearing the brunt of the pain, falling by 1.1% currently. That has seen USD/JPY slip from around 110.00-10 levels to session lows now around 110.85-90.
The swissie also gained as a result of the softer risk tone while risk/commodity currencies gave back a little of their earlier gains from Asia Pacific trading. The aussie remains the standout performer after the election result was friendlier to markets, with AUD/USD hovering around 0.6910-25 during the session.
USD/CAD also fell to lows of 1.3424 earlier on as oil prices surged following signals that OPEC+ could reach a decision to extend its output cut deal next month. But the pair bounced back to near 1.3440 now as oil pares gains following the turn in risk sentiment.
Looking ahead, expect the focus in US trading today to turn towards risk sentiment and how Wall Street performs. It looks like the US-China trade rhetoric isn't something that is going away any time soon and markets will continue to stay on edge as a result.
