Forex news from the European trading session - 28 September 2021
Headlines:
- China reportedly calls on state-owned enterprises to pick up Evergrande assets
- Citi cuts China 2022 GDP forecast to 4.9% from 5.5%
- Inflation expectations in the euro area run up to the highest since 2015
- Japan PM Suga confirms end to state of emergency measures on 30 September
- Oil powers ahead, closes in on July high
- Germany October GfK consumer confidence 0.3 vs -1.8 expected
- The bond market continues to set the tone in trading this week
Markets:
- USD leads, NZD lags on the day
- European equities lower; S&P 500 futures down 0.8%
- US 10-year yields up 4.5 bps to 1.528%
- Gold down 0.8% to $1,735.20
- WTI up 1.1% to $76.28
- Bitcoin down 1.7% to $41,975
The global energy crisis continues to be a key focus in the market at the moment, as energy prices in Europe surges higher once again and the reverberations are being felt in the bond market as well as in inflation expectations.
Treasury yields are sticking with the technical breakout from last week as we see 5-year yields climb to 1.02% for the first time since early last year, with 10-year yields also powering higher to 1.54% during the session.
Meanwhile, euro area inflation expectations also surged to its highest since 2015.
All of that is helping to keep the yen pressured with USD/JPY hovering around 111.30-40 levels and inching towards a test of the year's highs at 111.64-66.
The dollar also gained across the board as higher Treasury yields provided some support and also weighed on equities sentiment during the session. Noticeably, GBP/USD fell from 1.3710 to 1.3595 as the pound also felt the pinch of stagflation worries.
Commodity currencies aren't faring too well either with AUD/USD down 0.5% to 0.7250 and NZD/USD falling to its lowest in a month in a drop of 0.7% to 0.6960.
The advance in USD/CAD was more modest though with the pair up slightly from 1.2610 to 1.2640 levels as perky oil prices are also underpinning the loonie somewhat.
Brent is trading up above $80 for the first time since 2018 while WTI crude is seen up over 1% to above $76 as the upside momentum continues in the past week.
Looking over to equities, sentiment is starting to deteriorate as tech stocks are slammed the hardest amid the surge higher in bond yields. Nasdaq futures are down 1.4% while Europe's tech index looks on course for its worst day since October last year.
European indices are mostly down over 1% on the day while S&P 500 futures are down 0.8% and Dow futures down 0.3% as we approach North American trading.
