Forex news from the European morning session - 5 August 2019
Headlines:
- PBOC's Yi says that current yuan exchange rate is at an appropriate level
- Germany says optimistic that Georgieva will become the next IMF chief
- China private buyers reportedly halt US soybean orders on trade concerns
- China reiterates that US accusations that China hasn't purchased agricultural products are false
- UK July services PMI 51.4 vs 50.3 expected
- ECB's Nowotny cautions against resuming QE
- SNB total sight deposits w.e. 2 August CHF 582.7 bn vs CHF 581.2 bn prior
- Eurozone July final services PMI 53.2 vs 53.3 prelim
- Germany July final services PMI 54.5 vs 55.4 prelim
- France July final services PMI 52.6 vs 52.2 prelim
- Italy July services PMI 51.7 vs 50.6 expected
- Spain July services PMI 52.9 vs 53.6 expected
- ICYMI: China's offshore yuan hits lowest level on record
- Japan's Takeuchi: Market trend seems to be toward yen strengthening
- Japan's Takeuchi: We're seeing some nervous moves in markets
Markets:
- CHF leads, AUD lags on the day
- European equities lower; E-minis down 1.5%
- US 10-year yields down 7.5 bps to 1.77%
- Gold up 1.3% to $1,459.58
- WTI down 1.0% to $55.12
- Bitcoin up 12.8% to $11,728
Markets continued to side with haven flows during the session as markets remained nervous following US-China trade war escalation and the PBOC allowing the yuan to weaken below 7.00 per dollar earlier in the day.
The franc was the major beneficiary with EUR/CHF slipping to fresh two-year lows and USD/CHF tumbling from 0.9780-90 to a low of 0.9738 during the session.
The yen held firm as well with bond yields sinking heavily on the morning. 10-year Treasury yields began the session down by 7 bps before extending the downside to 10 bps but has recovered some ground heading into North American trading.
USD/JPY lingered around 105.90-00 to start the session before spiking to 106.30 briefly after China lamented about US agricultural purchases. But the action proved to be short-lived as price fell to 106.00-10 levels thereafter.
The other major mover was the dollar as it sank during the session with EUR/USD buyers seizing near-term control and breaking higher from 1.1140 to 1.1170 levels.
Meanwhile, the pound also recovered some poise against the dollar after better-than-expected UK services PMI data. Cable moved up from 1.2110 to near flat levels around 1.2160-70 currently as buyers continue to find reprieve near the 1.2100 handle.
Commodity currencies remain the laggard amid the ongoing risk-off mood as equities are battered alongside other riskies like oil and base metal commodities.
Gold remains an outperformer as such, holding gains of more than 1% during the session as bullion moved to new year's highs and threatening a further break to the upside.
Looking ahead, it's all about risk sentiment today and let's see if Trump has anything interesting to say about what China are doing with their currency later on in the session.
