Forex news for North American trade on August 12, 2019:
- US 30-year bond yields fall to the lowest since 2016
- US July budget deficit -$119.7B vs -$120.0B expected
- US Sec. Advisor Bolton: Expecting Chinese delegation in September
- People's Daily to publish article saying China can fight off any US trade war challenge - report
- Di Maio: Salvini has stabbed Italy in the back; will pay the price
- Boris Johnson weighing late-August trip to Berlin and Paris
- Mitch McConnell: Any violent crackdown in Hong Kong would be unacceptable
- Fed considers using counter-cyclical buffer for banks - report
- Morgan Stanley sees two more Fed cuts this year
Markets:
- Gold up $20 to $1511 after hitting six-year high
- WTI crude up 28-cents to $54.78
- US 10-year yields down 12 bps to 2.135%
- S&P 500 down 36 points to 2882
- GBP leads, AUD lags
Argentina's peso fell more than 15% after a largely-indicative primary showed Peronists far out ahead. The main stock index in Argentina -- the Merval -- fell a whopping 37% -- a full 15 percentage points worse than 'Black Monday' in the US in 1987. In USD terms, the drop is around 50%.
Argentina is relatively ring fenced from the global financial system and the spillover to Latam and EM currencies was limited to 1% or less.
Hong Kong might have been more of a problem for developed market risk assets. The situation isn't improving and Chinese police forces were doing large-scale drills in nearby Shenzen. The White House released a statement that it's an issue between Hong Kong and China and that was seen as a green light for Beijing to intervene.
Developed market FX was surprisingly tame given the move in bonds. USD/JPY finishes the day down 40 pips but the damage was done before New York arrived and it couldn't press to new lows even as Treasury yields cratered.
The euro continues to show its status as a carry trade funder. It was beaten up in Europe early but came all the way back and finished a dozen pips higher.
Cable showed some rare signs of life as rumors and somewhat credible reports circulate that parliament will stop a no-deal Brexit. Still, the 40-pip rally today isn't going to convince anyone that the bottom is in.
Commodity FX was surprisingly stable given the moves elsewhere. AUD fell 0.5% in Asian trade and basically stayed flat near 0.6750 afterwards.
