Forex news from the European morning session - 6 May 2019
Headlines:
- Trump continues to lambaste China on trade, says "won't be losing anymore"
- Eurozone May Sentix investor confidence 5.3 vs 1.2 expected
- SNB total sight deposits w.e. 3 May CHF 577.7 bn vs CHF 576.7 bn prior
- Eurozone April final services PMI 52.8 vs 52.5 prelim
- Germany April final services PMI 55.7 vs 55.6 prelim
- France April final services PMI 50.5 vs 50.5 prelim
- Italy April services PMI 50.4 vs 51.8 expected
- China says hopes that US can meet them halfway on trade talks
- Spain April services PMI 53.1 vs 55.1 expected
- China state funds are said to prepare steps to stabilise stock market
Markets:
- JPY leads, GBP lags on the day
- European equities lower; E-minis down 1.6%
- US 10-year yields down 4.3 bps to 2.482%
- Gold up 0.2% to $1,281.80
- WTI down 1.1% to $61.28
- Bitcoin down 1.0% to $5,635
Markets continued to stay in a sour mood after Trump's tariffs threat against China over the weekend sparked a risk-off move across all asset classes, throwing a potential trade deal in jeopardy. The yen is the biggest gainer and is holding its ground as USD/JPY ranged between 110.65-85 in the session after China said that it is still up for trade talks.
The dollar held steady as well against the rest of the major bloc as it advanced against risk/commodity currencies for the most part. AUD/USD stayed weaker around 0.6975-95 throughout the European morning and USD/CAD continues to be underpinned around 1.3470-90 levels with oil prices suffering on risk-off sentiment.
The pound is the biggest loser though, with cable covering the early gap lower at the start of trading today before falling to around 1.3120-30 levels at the start of the session. The declines continued as the pair fell to a low of 1.3100 and is threatening another test of the figure level ahead of North American trading.
Meanwhile, the euro is holding steady as it recovered from the early gap lower to hold at session highs now around the 1.1200 handle against the dollar.
Looking ahead, it doesn't look like Trump is backing down on his tariffs threat and with Beijing likely to only send a low-level delegation to Washington this week, it looks like trade tensions are poised to escalate further once the tariffs kick in.
Although European morning trade has been relatively steady for the most part, I reckon today we could see a potential extension of the risk-off mood once Wall Street gets into the thick of things. Trump's latest tweet here certainly provides the right platform for that so let's see if we'll get any more surprises along the way.
The other area to watch out for is emerging markets. With the yuan declining today and US-China trade talks suffering a setback, the spillover effects could reverberate further risk-off tones across markets.
