Forex news from the European trading session - 3 July 2018
Headlines:
- PBOC senior advisor says yuan decline is driven by market expectations
- Riksbank's Ingves says too early to raise rates now
- Italy's Tria says economy and public finances are in good shape
- Eurozone May PPI +0.8% vs +0.5% m/m expected
- Eurozone May retail sales 0.0% vs +0.1% m/m expected
- BOE reiterates that Brexit poses material risk to disruption to financial services
- UK June construction PMI 53.1 vs 52.5 expected
- More from Saunders: BOE rates may need to rise faster than market expects
- BOE's Saunders says bad weather effect on the economy is temporary
- China calls for US to stop suppression against Chinese companies
- Riksbank leaves interest rate unchanged at -0.50%
- Spain June unemployment change -90.0k vs -98.1k expected
- France YTD May budget balance -€55.1 bn vs -€54.3 bn prior
- PBOC governor says to keep yuan stable at equilibrium level
- Full statement of the RBA's July monetary policy meeting
- RBA leaves cash rate unchanged at 1.50%
Markets:
- AUD leads, USD lags on the day
- European equities are all higher
- Gold up 0.41% to $1,247.04
- WTI crude up 1.27% to $74.88
- US 10-year yields up 0.9 bps to 2.880%
- Bitcoin down 0.71% to $6,572
Keep calm and return to trading risk-on again. That's the message the market is saying today. The session started off with a rebound in sentiment for Asian equities - especially Chinese mainland stocks - and that gave European investors the nudge it needed to push stocks higher on the day. Just before that, we had the RBA meeting and it was yet another non-event as the central bank held cash rate steady for a record 21st consecutive meeting.
In terms of data, the releases today didn't make all too much of a difference. The focus of the market is heavily on sentiment and flows right now. And with the German political situation looks to be sorted out, it gave further incentive for investors in Europe to push risk trades higher on the day.
The AUD was the main beneficiary in all of this as the currency improved on the back of a rebound in risk sentiment, China stepping in to verbally caution the market on the recent yuan declines, and higher bond yields.
No surprises that commodity currencies are the ones leading the charge as the loonie and kiwi are among those next in line. The former also benefiting strongly from higher oil prices on the day as WTI crude closes back in on the $75 handle. The kiwi started trading a little poorly on the session, but soon found its stride as the clear risk sentiment play in the market played its part too. But AUD/NZD moving above key technical levels is also helping to pin the kiwi down a little while also further boosting the aussie.
Looking at other currencies, the euro continues to benefit from the upbeat tone after the German political situation settled down but EUR/USD's gains owe more to the fact that the dollar has been weakening throughout the day. The pair rose to a high of 1.1673 on the session before retreating to 1.1650 levels now.
Meanwhile, GBP/USD also mirrored similar gains as the EUR/USD moving to a high of 1.3170 before consolidating and then getting a further boost higher on the back of BOE board member's Saunders hawkish comments on rate hikes. That pushed the pair to a high of 1.3196 and has since settled there until now.
As for the Japanese yen, it's been one of the laggards along with the dollar throughout the session with USD/JPY having traded between 110.80-00 levels - bound in a tight spot as both currencies suffer as risk appetite returns back to markets.
