ForexLive European FX news wrap: Bond rally continues, risk slumps
Forex news from the European trading session - 8 July 2021
- ECB sets inflation target at 2% after strategy review
- Treasury yields fall further as the unrelenting bid in bonds continue
- BOJ reportedly expected to cut growth forecast for the year as virus restrictions dampen outlook
- Japan officially declares state of emergency for Tokyo
- US futures extend fall in European morning trade
- AUD/USD falls to fresh lows for the year as risk aversion kicks in
- USD/CAD eyes further upside break above 1.2500
- Germany May trade balance €12.6 billion vs €15.4 billion expected
- JPY leads, NZD lags on the day
- European equities lower; S&P 500 futures down 1.0%
- US 10-year yields down 4 bps to 1.28%
- Gold up 0.6% to $1,813.67
- WTI down 0.6% to $71.77
- Bitcoin down 5.3% to $32,699
The market is tilting towards being risk-off as equities come off recent highs, with European indices marked down by over 2%, with some set for their worst day since April.
US futures are also on the retreat, falling by a little over 1% as the market tries to digest the recent developments in the bond market. 10-year Treasury yields took another nosedive, falling below 1.30% as the yield curve flattens further.
That is creating some uneasiness with risk aversion being the name of the game, as the Japanese yen leads gains in the major currencies space.
USD/JPY is seen on the retreat, falling from 110.40 to 109.70 while commodity currencies were dragged lower with the aussie hitting fresh lows for the year.
AUD/USD fell from 0.7460 to 0.7420, dipping to its lowest levels since 9 December with sellers eyeing a move towards 0.7400 next.
Meanwhile, NZD/USD is dragged back below 0.7000 in a 1% drop while USD/CAD surged to its highest levels since April upon a break of 1.2500 to a high of 1.2590.
In central bank news, the ECB switches up its inflation targeting to be more symmetric at 2% while allowing for some room to overshoot.
But the big story is the bond market and that is certainly causing a rethink in the reflation trade and central bank policy outlook.