Forex today witnessed a cautious start to a big week ahead, with softer risk tones persisting amid global growth concerns sparked by escalating trade wars. The manufacturing sector activity deteriorated in Japan and South Korea while held steady in China. Therefore, traders opted to hold the safe-havens such as the Yen, gold and the Swiss Franc at the expense of the risky bets, the Asian equities, Treasury yields and oil prices. Despite risk-aversion, the US dollar slipped further into the red zone across its main competitors amid dovish comments from Fed’s Daly and increased bets of a Fed rate cut by end-2019.
Amongst the G10 currencies, the USD/JPY pair fell to fresh 4.5-month lows and tested the 108 handle while the Antipodeans traded firmer amid broad USD weakness. The Aussie rose to three-week tops near 0.6960 amid Chinese data relief and the US President Trump deciding against the tariffs on Australia. The Kiwi inched 0.25% higher and regained 0.6550 barrier briefly. Meanwhile, the USD/CAD pair reported modest losses below 1.3500 despite a 1% drop in oil prices.
On the other hand, both the EUR/USD pair and the Cable advanced amid falling Treasury yields and ahead of the US President Trump’s UK visit. Gold prices on Comex reached ten-week highs above 1315 on widespread risk-aversion and dovish US interest rates outlook.
Main Topics in Asia
Weekend top stories from the financial press
Mexican Foreign Minister will hold a news conference in Washington DC on Monday
WTI stabilizes on $52 handle following a 17% drop in May
Trump has decided against tariffs on Australia - The New York Times
China draws bottom line - Global Times
Goldman Sachs lowers US Q2 GDP growth forecasts - Reuters
China's Caixin manufacturing PMI steadies at 50.2 in May, Aussie hits 3-week tops
China probes FedEx over Huawei parcels - Reuters
Asian stocks report modest declines on trade tensions
Australian PM Scott Morrison: Australia is complying with US aluminium deal after tariff exemption
BOJ’s Kuroda: BOJ will continue easing to support the economy
Gold tops 10-week high amid risk aversion wave, greenback weakness
Fed’s Daly: Mexico tariffs raise uncertainty, will hurt economic growth
Key Focus Ahead
Markets gear up for a busy EUR calendar ahead following an eventful Asian session. The Swiss CPI release at 0630 GMT will pave the way for a slew of Euro area final manufacturing PMI reports that will start trickling in from 0715 GMT. The main manufacturing PMI readings from Germany, Eurozone and the UK will gain market attention amid ongoing trade tensions and Brexit uncertainty.
The NA session also sees the releases of the Canadian and the US Markit manufacturing PMIs due to be reported at 1330 GMT and 1345 GMT respectively, soon followed by the US ISM manufacturing PMI for May at 1400 GMT. At the same time, the US construction spending report for the month of April will be also published.
EUR/USD looks north with US-DE yield 10-year spread hitting 14-month low
The narrowing US-German yield differentials will likely keep EUR/USD better bid on the first trading day of the week. EUR/USD may come under pressure if the Eurozone and German PMI number are revised lower.
GBP/USD extends recent recovery ahead of manufacturing PMI, US Pres. Trump’s UK visit
While trade tensions and sluggish data were already taking a toll on the US Dollar (USD), growing doubts on the US economic strength recently favored the greenback bears, which in turn propelled the GBP/USD pair’s latest recovery towards 1.2655 ahead of the London open on Monday.
EUR/USD: Three reasons why it can fall after a weekend of bad news
EUR/USD has enjoyed a recovery in the last hours of May, thanks to end-of-month flows. That may change in early June, as traders return.
Reserve Bank of Australia Preview: Rate reduction expected
Markets are convinced that the Reserve Bank of Australia will initiate its first-rate cutting cycle on Tuesday reducing the cash rate by 25 basis points to 1.25%.
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