RBNZ remains on the sidelines

Sverre Holbek, CFA Danske Bank A/S

Market movers today

Market focus will be on the escalating tension between the US and North Korea over North Korea's missile programme.
In the UK, industrial production and construction data for June are out today. This is of interest given the negative growth contributions from manufacturing and construction. The NIESR GDP estimate for July (usually a good predictor of actual GDP growth) and trade balance figures will be announced too.
In the US, FOMC member Dudley's speech is likely to be the main event. PPI data and the Monthly Budget Statement are also due for release.
In Scandi markets, Danish and Norwegian inflation data as well as Swedish industrialand services production data are released today. Please see the Scandi section on page 2 for further details.

Selected market news

North Korea sabre-rattling continues as US seeks to ease tensions. Overnight, state media reported that North Korea is examining plans to fire four intermediate-range ballistic missiles at Guam. The missiles would be fired by mid-August, pass over Japan and land near the island which holds strategically important US military bases. The statement came in response to US President Trump's "fire and fury" warning on Tuesday. Earlier, US secretary of state Tillerson had sought to downplay tensions, saying that North Korea posed no "imminent threat".

UK real estate slump spreads. The RICS survey released overnight showed prices stagnating in July, as the price decline of prime properties in the centre of London spread to neighbouring areas. Meanwhile, prices in Northern Ireland, the West Midlands and the southwest increased.

RBNZ remains on the sidelines. In New Zealand, the central bank left the official cash rate unchanged at 1.75% overnight, in line with expectations. Reflecting recent subdued economic data, the RBNZ said that monetary policy would be kept accommodative for a considerable period.

Geopolitical concerns triggered by North Korea tensions set the course for a modest riskoff reaction on markets yesterday. In Europe, the Euro Stoxx 50 index closed down 1.3% and 10yr Bund yields declined 4bp. In the US, the S&P500 index pared earlier losses to close the day flat. US 10yr Treasury yields held steady around 2.25%. This morning, Asian stocks have reversed earlier gains, while emerging markets sold off more broadly.

Download The Full Daily FX Market Commentary

Author

Sverre Holbek, CFA

Danske Bank A/S

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.