FX News Today
European Fixed Income Outlook: 10-year Bund yields are down -1.8 bp at 0.376% in opening trade, versus a -4.8 bp slide in 10-year Treasury yields, which are at 2.869%. 10-year JGB yields also shed earlier gains and are now down -0.2 bp at 0.024%, as stock markets remain under pressure amid the escalating trade row between the U.S. and China, which remains the main focus. The local calendar perks up a bit with Eurozone current account numbers and construction output data, although both are not really market movers. The Sintra conference on central banking starts in earnest today. This year’s focus is on wage and price setting and we don’t expect speakers including Praet and Draghi to comment too much on last week’s ECB decision.
FX Update: The yen has rallied amid a risk averse backdrop, with stock markets in Asia and U.S. equity index futures dropping sharply after President Trump threatened China with $200 bln of fresh tariffs. USDJPY has so far dropped to a six-session low at 109.63, and the pair is very much amid a downward path just ahead of the London inter-bank open. The biggest mover has been AUDJPY, a cross rate which trades like a high beta asset and thereby has a reputation of being something of Forex market risk-appetite barometer. The cross has lost just over 1.3%, printing two-and-a-half-month lows under 81.0. Other yen crosses are also down, with EURJPY, for instance, foraying into three-week low territory under 127.40. In stock markets, China’s Shanghai Composite has lost over 3%, while USA500 futures are down 1%. As for non-yen pairings and cross rates, the dollar bloc currencies stand out as being under-performers, while many emerging market currencies, already reeling following last week’s hawkish Fed guidance, have posted fresh lows for the year against the dollar. EURUSD, by contrast, is presently settled at near net unchanged levels on the day, at 1.1620 bid.
Charts of the Day
Main Macro Events Today
- Speeches : ECB President Draghi, ECB’s Praet, Fed’s Bullard, FOMC Member Bostic and FOMC Member Williams
- US Housing Starts and Building Permits – Expectations – May housing starts are estimated rising 0.6% to 1.295 mln following a 3.7% plunge in April to 1.287 mln. The April decline was led by a sharp drop in multi-family starts and a little-changed reading in single-family, with both expected to improve in May. Building permits expected at 1.305 mln following 1.352 mln in April.
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Andria Pichidi
Market Analyst
HotForex
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