Market movers today

  • Today, we get final service PMIs (including the ISM non-manufacturing index from the US), which will tell us to what extent the manufacturing slowdown is spilling over to the more important service sector (at least in terms of overall GDP growth and jobs growth).

  • Also today, we get Sentix Investor Confidence for the euro area, which is probably not going to show more encouraging signs.

  • Otherwise, this week we are looking forward to hearing from FOMC members for any signs of whether more cuts are in cards.

  • Also, we are looking for any news on trade policy after Trump's escalation last week. To us, it seems like a trade deal has moved further away, see China Weekly Letter .

 

Selected market news

The decision on Thursday night by President Trump to levy new tariffs on Chinese imports was not received well in financial markets. Especially, the global growth and China-sensitive German Dax index came under strong pressure, closing down more than 3% on the day and overnight the Nikkei was down by close to 2.5%.  

Risk-averse investors flocked to fixed income and 10Y Bund yields were pushed below -0.5% during Friday's session. In fact, the whole German sovereign curve from zero to 30-year traded below zero for the first time ever, joining Denmark and Switzerland. There are now 12 countries in Europe for which the 10Y benchmark is trading below zero. Ireland could very well be next in line as investors look for markets that offer positive yields. In the US, more than a full 25bp cut is again priced for next month and the US curve has further inverted overnight, as 10Y yields are down 7.0 bp to 1.78%. Hence, we should see another significant drop in European yields when FI markets open this morning.  

If anyone believed that China would 'give in', the answer came overnight, as the Chinese government asked its state-owned enterprises to halt imports of US agricultural products. Furthermore, the yuan made a spectacular 1.5% drop this morning, pushing USD/CNY above 7.0 for the first time in a decade. According to Bloomberg, the People's Bank of China said the move was due to "protectionism". Overall, the trade situation has clearly escalated further over the weekend.

The escalation could potentially be a more fundamental game changer for risk appetite. If Trump thought that financial markets would be ready to 'accept' a trade escalation just because the Fed is lowering rates, he could very well be wrong, especially when markets take into account the simultaneously global weakening of the manufacturing cycle.

Global central banks turned more dovish in July due to the trade war concerns. After the latest development, we believe there is little doubt they will now deliver more easing. Note in that respect that USD/JPY dropped below 106 and 10Y JGB yields dropped slightly below the -0.20% lower bound yield target this morning.

The Bank of Japan and Ministry of Finance will meet this morning to discuss financial markets. In the wake of the CNY drop, markets will be wondering whether Japan will intervene in FX market and ease monetary policy further.

Download The Full Daily FX Market Commentary

This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex Analysis

Editors’ Picks

EUR/USD hits new two-months highs after the ECB's boost

EUR/USD is trading above 1.1250, the highest since mid-March. The ECB added €600 billion in fresh stimulus, more than expected. The bank's move joins German stimulus and hopes for a recovery. 

EUR/USD News

GBP/USD returns to its lows as sentiment turns sour

GBP/USD trades around 1.2530, retreating from intraday highs as worse-than-expected US data took its toll on mood. The Bank of England is ramping up preparations for a no-trade-deal Brexit amid deadlocked talks, somehow limiting the intraday rally.

GBP/USD News

Cryptocurrencies: Crossroads in the war for dominance

Ethereum consolidates the 10% market share, looking forward to breaching the 10.25% level. The sentiment level shoots up again and clearly shows the two-way moment in the crypto market. Ripple is refusing to join the bullish party and remains anchored at the $0.20 level.

Read more

Gold recovers further from 1-month lows, moves back above $1715 level

Gold added to its intraday gains and refreshed daily tops, around the $1718 region during the early North American session.

Gold News

WTI: Recovery remains capped below $37 mark amid OPEC+ uncertainty

WTI (July futures on Nymex) is ranging in the familiar trading band near mid-36s so far this Thursday, having failed yet another upside attempts just shy of the 37 mark.

Oil News

Forex Majors

Cryptocurrencies

Signatures