Forex news for NY trading on May 6, 2019
- US stocks stage big comeback. Still close down but way off the lows
- BOC Poloz: Impossible to predict consequences of US-China trade dispute
- Crude oil trades near session highs
- Feds Financial Stability Report: Financial risks little changed since last fall
- Chinese delegation to travel to US, but it may be smaller - report
- Fed senior loan officer survey sees tighter CRE loan standards
- BOC's Poloz: Fundamentals of housing market remain strong
- European shares end lower but off extreme levels.
- Trump threatened tariffs after Lighthizer told him of Chinese reversal
- Oil completely erases its decline, rebounds 3%
- China continues to plan to send delegation to Washington, but may delay departure
- Fed's Harker repeats that he sees one rate hike at most this year
- Economists skeptical that Fed can credibly change its inflation strategy
- The JPY is the strongest while the GBP is the weakest
- Tariff man brings back the volatility
In other markets, the snapshot is showing:
- Spot gold up $1.20 or 0.09% at $1280.36
- Crude oil rose $0.72 or 1.16% at $62.66. The price of crude oil recovered from earlier lows from the tariff scare
The day started with fear from the Trump weekend tweet. That sent the forex flows into the JPY and USD. The GBP was the weakest on Brexit concerns. followed closely by declines in the NZD and AUD (par for the course there). With no economic data, the focus would be on the US stocks.
The major indices opened and made session lows in the first 5 minutes of trading (if not the first minute) and from there marched slowly higher.
- The S&P was down -1.61% at the lows and closed down -0.45%.
- The Nasdaq was down -2.23% at the low and closed down -0.50%.
- The Dow was down -1.78% at the low and closed down -0.25% (the Dow was down nearly 500 points but closed down only -66.47 points).
- The Russell 2000 actually closed positive on the day (+0.07%).
Needless to say, it was a big comeback for stocks.
Why the run back higher?
Sources said that China was still going to send a delegation to Washington for trader talk meetings this week. There was rumblings that it might not happen. Now, with what attitude do they come with is still up in the air, but the market made the assumption that they are still in the mood to make a deal. Of course as early as Friday, the Pres. and his team were harping on the progress being made. Needless to say, some early buyers, were rewarded with a nice dip to buy. PS technicals also helped the rally. The Nasdaq opened below the 50 and 100 hour MAs but rebounded back above both by the closer. The S&P index did the same and closed just below its 50 hour MA. So there was some bearishness technically, that shifted to bulish (or at least less bearish) as the rally progressed.
The impact on the dollar was mixed. The dollar changes vs the EUR, GBP, CHF and JPY are ending the session very close to levels seen at is the start of the trading session in NY. The dollar did weaken a bit against the CAD, and AUD in the NY session, but strengthened more against the NZD. The Reserve Bank of New Zealand is a 50-50 proposition for a cut later this week (they announce their decision on Wednesday morning in NZ) and that may have contributed to the softer tone. The RBA will announce their intentions in the new trading day today (they also could cut). The AUDUSD did move lower from the Friday close at 0.70208 to a low of 0.6962, but there was a recovery in the NY session to the 0.7000 area. The pair closed the day at 0.6990.
For the bond market today, yields moved lower on flight to safety concerns, but recovered some of the declines. Nevertheless, the yields ending the session down -1.3 bps to -3.2 bps depending on the point on the yield curve.
Overall, the focus for the day was on the stocks and they dodge a bullet. However, the recovery is on the "hope" that China comes back in line. The delegation can still come to Washington and continue their recent hard line, or soften. You can say the US has the advantage as their stock indices were less impacted than the Chinease stock indices. However, the waters can easily shift. The headlines will be watched and the markets can whip around.
