Forex Today: Risk-off came back
|What you need to know on Friday, May 22nd:
Risk-off returned by the hand of US-China trade tensions. The greenback ended the day mixed across the board, although major pairs remained within familiar levels.
The preliminary estimates of Markit May PMIs mostly beat the market’s expectations, but remain well into contraction levels, suggesting a steeper downturn for the second quarter of the year.
Tensions mount between the US and China, amid trade divergences and Washington accusing Beijing for being responsible of the coronavirus pandemic. The US is tightening controls on the use of its technology by Huawei while launching an investigation over the origins of COVID-19. Chinese speaker for the National People’s Congress, Zhang Yesui, said that China will firmly defend its interest if the US does something to undermine the country’s core interests.
The EUR/USD pair peaked at 1.1008 but was unable to hold on to gains, ending the day in the red.
The GBP/USD pair traded little changed for a second consecutive day, with the Sterling affected by comments from BOE’s Governor Bailey, saying that the central bank is considering negative interest rates as an option.
Fed’s Powell offered a speech during the American afternoon. Among other things, he quoted John Kenneth Galbraith, who said that “economic forecasting exists to make astrology look respectable," a way to explain the high levels of uncertainty amid the coronavirus outbreak. He also said that he believes the economy will recover, but it would take time.
Resurgent demand for the greenback weighed on gold prices during the American afternoon, in spite of the risk-averse mood. Spot gold traded as low as 1,717 but recovered ahead of the close to settle at around $1,725 a troy ounce.
Crude oil prices closed the day marginally lower, as tensions between the US and China weighed on the commodity. WTI settled just below $34.00 a barrel.
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