Forex news from the European morning session - 24 May 2019
Headlines:
- China envoy to US says no official talks scheduled between Trump and Xi
- UK Conservative Party: Nominations for new leader will end in the week of 10 June
- UK May CBI retailing reported sales -27 vs 6 expected
- Theresa May says that she is to step down on 7 June
- Japan downgrades its view of the economy for a second time this year
- UK April retail sales 0.0% vs -0.3% m/m expected
- Microsoft is reportedly said to stop accepting new orders from Huawei
- China says US politicians are making all kinds of rumours but not giving evidence
- China says it is to issue policy to boost development of small tech companies
- Japan's Abe: No change to sales tax hike proposal unless Lehman-scale shock occurs
Markets:
- NZD leads, CHF lags on the day
- European equities higher; E-minis up 0.5%
- US 10-year yields flat at 2.318%
- Gold down 0.1% to $1,282.50
- WTI up 1.1% to $58.54
- Bitcoin up 1.9% to $8,031
UK politics stole majority of the headlines in the European morning as Theresa May announced her resignation, set for 7 June. She will then stay on as caretaker prime minister until a new leader is appointed to take over from her, expected around mid-to-end July.
The pound was sent all over the place as a result as traders digested what this would mean for the currency and Brexit. Cable jumped up from 1.2690 to 1.2710 before falling to 1.2660-70 and then climbing to session highs of 1.2718 before being brought back down again now to near 1.2660-70 levels as the dust settles.
Overall, despite all the chaos, the fact that a new leader is coming in will not change the Brexit equation and we're now left with trading the odds of who will become the next UK prime minister and manage the mess that is Brexit.
Besides that, markets are a bit more steady in general as cautious optimism reigns amid lingering US-China trade tensions. US equity futures are holding on to decent gains although that has been tempered with in the final few minutes after a Chinese official said taht there are no talks scheduled between Trump and Xi currently.
USD/JPY holds near flat levels on the day, mirroring the mood in Treasury yields currently, as the pair sits around 109.60-70 throughout the session. Meanwhile, the kiwi leads gains in the currencies space on the slightly better risk mood with NZD/USD holding around 0.6540-45 from around 0.6525 at the start of the session.
The dollar in general is a bit weaker as the softer touch from yesterday's trading continued early in the session as EUR/USD rose from 1.1180 to a high of 1.1205 before large expiries and offers at the figure level are helping to keep price action in-check.
Looking ahead, there's still plenty to look forward to as the slight hiccup in risk sentiment over the last few minutes suggest we could be seeing a bit of a bumpy end to the week perhaps? For now, cautious optimism is still the dominant theme so let's see where that leads us as the day ends later.
Also, a note of caution for euro and pound traders, the European Parliament election results will be announced on Sunday, so there is a bit of a political risk heading into the weekend. The results could yield better-than-expected outcomes for populists and further losses for the Tories so there's added risk of a gap lower at the open on Monday. Just be mindful of that if you're still holding positions into the weekend.
