Forex today saw risk-off flows seeping into Asia this Wednesday, as rising Treasury yields re-fuelled investors’ concerns over higher borrowing costs while dwindling peace talks between North and South Korea also dampened the market sentiment, boosting the demand for the safe-havens at the expense of the risk/ higher-yielding assets.
The Yen, therefore, attempted a minor bounce versus its American rival, despite a weaker Japanese GDP print, and traded near 110.25 levels. The Aussie traded on the back foot amid risk-aversion and softer Australian wages data. However, the Kiwi ditched its OZ counterpart and advanced towards the 0.69 handle, having found some support from a retreat in the US Treasury yields from multi-year tops.
Among other related markets, the Asian equities traded mostly lower on rising geopolitical tensions and in the wake of the latest rally in Treasury yields. Both crude benchmarks dipped but remained near four-year highs while gold prices attempted a recovery towards $ 1295 mark.
Main topics in Asia
Ben Broadbent, the Deputy Governor of the Bank of England (BoE), made some statements regarding a potential slowdown in the UK’s economy, as noted by The Telegraph.
Japan's first-quarter gross domestic product (GDP) contracted at an annualized rate of 0.6 percent as private consumption and capital expenditure (capex) slowed, the official data released earlier today showed.
The yield on the benchmark 10-year treasury note finally cut through the resistance at 3.04 percent and rose to 3.095 percent yesterday - the highest level since 2011 and the technical charts indicate the party has just begun.
Reuters reports that North Korea on Wednesday cast doubts on the summit between its leader Kim Jong Un and US President Donald Trump scheduled for next month while suspending military exercises between South Korea and the United States.
North Korea’s official Korean Central News Agency (KCNA) came out with further headlines, citing that North Korea will never engage in economic trade with the US in exchange for giving up its nuclear programme.
South Korea’s Unification Ministry came out with a statement, via Reuters, responding to the KCNA reports that North Korea suspended talks with the South.
Key Focus ahead
After an eventful Asian session, the European session appears relatively quiet, with the only first-tier Eurozone final CPI data due to be released among other minority reports. Later, during mid-Europe, the ECB President Draghi will be seen on the wires, delivering opening remarks at an ECB event held in honor of the out-going ECB Vice President Vitor Constancio, in Frankfurt.
The NA session is a lot busier, with the Canadian manufacturing sales data due on the cards ahead of a series of macro releases from the US docket that includes the housing and industrial production data. Also, the CAD traders will eye the speech by the BOC Governing Council member Schembri and EIA crude supplies data for near-term trading impetus. Meanwhile, the comments by the SNB Chairman Jordan will also remain in focus later on Wednesday.
Also, attention will remain on the US-China trade talks, as the Chinese delegates arrived in Washington earlier today to discuss the trade issues.
The common currency could continue losing altitude in the near future as the ECB and the Fed continue to move in opposite directions. The ECB balance sheet has expanded to a new lifetime high. On the other hand, the Fed is tapering its balance sheet.
Today sees a notable lack of figures for the GBP, but the US session is a heavily-scheduled affair, starting off with US Building Permits (forecast 1.35 million, prev. 1.354 million) alongside a speech from the Fed's Bostic at 12:30 GMT ….
The 10-year treasury yield rose to 3.09 percent on Tuesday - the highest level since 2011 and looks set to rise further towards 3.5 percent, according to technical charts.
China’s state news agency, Xinhua, reports that the Chinese delegation have arrived in Washington for trade talks.
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