Forex news from the European morning session - 6 August 2019
Headlines:
- PBOC reportedly tells foreign firms that yuan won't keep falling
- PBOC's Chen: US labeling China as a currency manipulator is wrong
- Fed's Daly: Aggressive rate cuts not warranted without evidence of a stronger economic downturn
- PBOC says that it opposes US' accusation of currency manipulation
- ICYMI: Boris Johnson reportedly has no intention of renegotiating Brexit deal
- Germany June factory orders +2.5% vs +0.5% m/m expected
- Former Fed chairs take a jab at Trump on the need for central bank independence
- Some subtle changes to note on the RBA August monetary policy statement
- RBA leaves cash rate unchanged at 1.00% as expected
- Turnaround in yuan sentiment sees risk assets rebound
Markets:
- AUD leads, JPY lags on the day
- European equities higher; E-minis up 1.2%
- US 10-year yields up 5.2 bps to 1.76%
- Gold flat at $1,463.83
- WTI up 0.7% to $55.05
- Bitcoin up 0.1% to $11,734
Turnaround Tuesday continues as markets remain more steady after the risk recovery in Asia Pacific trading. The rebound came after the PBOC fixed the yuan stronger-than-expected and announced a large CNH bill issuance in Hong Kong to help alleviate pressure off the currency in the offshore market.
That allowed the yuan to stabilise with USD/CNH falling from 7.14 to around 7.06 levels as we began the European morning.
USD/JPY made an early move from 106.50 to 107.00 before settling around 106.50-70 levels during the session. The risk rebound saw Treasury yields climb with 10-year yields having been up by 7 bps at one point - now just up by ~5 bps at 1.76%.
The RBA left its cash rate unchanged and maintained a somewhat similar tone to its July statement, allowing for the aussie to gain on the better risk mood. AUD/USD moved up from 0.6780 to 0.6800 and is settling just under there currently.
The dollar was a notable mover as it fluctuated back and forth for the most part today. EUR/USD fell from 1.1250 to 1.1190 amid the turnaround in risk sentiment before climbing back to 1.1220 and is now finding its way back to session lows of 1.1185 currently.
Meanwhile, there was also notable action in the pound as cable made its way above the 1.2200 handle briefly on further short covering before slipping back to 1.1270-80 levels now.
Looking ahead, expect markets to stay focused on the risk mood with US futures gaining solid ground into the open. If anything else, be wary of more potential US-China trade rhetoric to follow from the US camp.
