The risk-off sentiment gripped the Asian markets this Friday and remained the main underlying theme across the fx board after the US President Trump announced new tariffs on Mexico and intensified the global trade war. The Mexican peso was battered on the headlines, having sent the USD/MXN cross to two-month tops near 19.60 levels.
On the other hand, the safe-haven Yen rallied hard amid an increased flight to safety following the reports that China is ready with a plan to limit the rare earth exports to the US, squashing USD/JPY to fresh three-month lows near 108.90 region. The risk assets such as the Asian equities, US equity futures, oil and Treasury yields took a beating while the US dollar index pulled back from two-week tops, capping the downside in the Antipodeans, the Euro and the pound.
The Aussie tested the 0.69 handle on disappointing Chinese official manufacturing and services PMI reports but managed to hold above the last. The Kiwi remained better bid near 0.6515 region while the CAD surged to 1.3535 vs. the greenback despite the oil-price weakness.
Main Topics in Asia
USTR Lighthizer: Believes USMCA will ultimately attract broad bipartisan support in Congress
Trump steps up pressure on Democrats to replace Nafta - FT
Pompeo: Attacks on oil tankers in Gulf were ‘efforts by Iranians to raise the price of crude oil
German Chancellor Merkel takes aim at Trump in ‘tear down walls’ speech – Politico
Japanese data dump, headline CPI: 1.1% vs 1.2% expected
Trump steps up the ante on trade wars by imposing tariffs on Mexican imports, (MXN - 1.85%)
Chinese data leaked early: PMI for May, Composite reported at 53.3 (prior 53.4)
Mexican Deputy ForeignMin Seade: Move from US Pres. Trump is 'very extreme'
WTI declines to March lows amid trade woes
Bank of Korea maintains the status-quo in May amid US-China trade war
Ex-PBOC Chief Dai believes there'll be good news from China-US trade talks in Japan
China said to have a plan ready to limit rare earth sales to the US if necessary, JPY rises further
Huawei repatriates US workers from Its China base – FT
US Pres. Trump and Japan’s Xi meeting firms for G20 in Japan next month - SCMP
Key Focus Ahead
The German Retail Sales and UK Nationwide House Prices data, due at 0600 GMT, will kick-off a relatively busier final EUR calendar for this week. The German retail sales are likely to rebound for the month of April, although the data is unlikely to reverse the current bearish view on the shared currency. The Swiss retail sales data is also on the cards at 0630 GMT, followed by the Italian GDP report for the first quarter at 0800 GMT. From the UK docket, the second-liner net lending to individuals, consumer credit and mortgage approvals data will drop in at 0830 GMT.
Ahead of the US open, the German Prelim CPI data will be released at 1200 GMT that is likely to have a significant impact on the EUR markets. In the NA session, at 1230 GMT, we have a raft of economic news, including the US Core PCE price index, personal spending, Canadian GDP and industrial figures. Later in the session, the US UoM consumer sentiment index and Baker Hughes oil rigs count data will hog the limelight at 1400 GMT and 1700 GMT respectively.
Despite a heavy-showing data-wise this Friday, the fx space is likely to be driven by the risk sentiment, in the wake of escalating fears over the US-led protectionism and its impact on global growth.
EUR/USD looks vulnerable amid trade war, German CPI eyed
EUR/USD’s recovery attempts from two-year lows of 1.1106 continue to run into resistance just ahead of 1.1140, leaving the pair consolidating in a tight range amid escalating global trade tensions and ahead of the German Preliminary CPI release.
GBP/USD cares less for UK’s political uncertainty amid USD pullback
While trade headlines are all in the limelight, for now, global political developments and second-tier data from the UK and the US could entertain momentum traders during the rest of the day.
Gold aims for 100-day SMA as growing pessimism favors safe-havens
With the global trade and political news headlines portraying murkier future ahead, gold prices extend previous run up towards 100-day SMA while trading near $1292 ahead of the European open on Friday.
Canadian Q1 GDP to arrive softer at 0.4% q/q - TDS
The TD Securities (TDS) Analysts offer a brief preview on what to expect from today’s monthly as well as the quarterly release of the Canadian GDP growth figures, due at 1230 GMT.
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