After starting the trading week on a mixed note, the Greenback finally regained its footing and began charging higher against all its peers.
The Kiwi, meanwhile, extended its losses even as risk-taking prevailed in Europe.
As for other currencies of note, there’s the euro since the euro was the second worst-performing currency after the barely edging out a win against the Kiwi.
- German retail sales m/m: -0.6% vs. 0.8% expected, -0.2% previous
- KOF Swiss economic barometer: 105.3 vs. 106.0 expected, 105.1 previous
- Euro Zone private loans y/y: 3.0% vs. 2.9% expected, 2.9% previous
- Italian HICP m/m: 0.5% vs. 0.7% expected, 2.3% previous
- Italian HICP y/y: 0.6% vs. 0.7% expected, 0.9% previous
- German HICP m/m: 0.0% as expected, 0.4% previous
- German HICP y/y: 1.4% vs. steady at 1.5% expected
European Commission spokesman Margaritis Schinas was speaking earlier and he said that:
“The only thing that I can tell you today is that we are patient but we are also prepared.”
This statement is within the context of the temporary tariff exemption that Trump granted to the E.U. since the exemption will expire by tomorrow and there are no signs yet that the E.U. has secured a deal for a permanent exemption or even an extension.
An optimistic start in Europe
Europe is starting the new week on a slightly optimistic note it seems since the major European equity indices were broadly higher for the day.
And according to market analysts, the risk-friendly vibes in Europe were due to deal-making activity. Although easing geopolitical tensions after the two Koreas seemingly made peace also helped to improve sentiment.
- The pan-European FTSEurofirst 300 was up by 0.08% to 1,509.87
- Germany’s DAX was up by 0.12% to 12,595.51
- The blue-chip Euro Stoxx 50 up by 0.15% to 3,523.85
- U.S. equity futures were in positive territory.
- S&P 500 futures were up by 0.33% to 2,680.25
- Nasdaq futures were up by 0.53% to 6,705.00
Global bond yields rise
Global bond yields were broadly higher during the morning London session, with European bond yields in the lead.
And market analysts say that, bond yields rose because of dampened safe-haven demand for bonds, thanks to the risk-friendly vibes amid easing political tensions in the Korean peninsula.
- German 10-year bond yield up by 2.47% to 0.581%
- French 10-year bond yield up by 2.44% to 0.813%
- U.K. 10-year bond yield down by 0.76% to 1.435%
- U.S. 10-year bond yield up by 0.25% to 2.964%
- Canadian 10-year bond yield up by 0.30% to 2.331%
Major Market Mover(s):
The Greenback was the one currency that ruled them all, not just during the morning London session, but for the day so far as well.
And it looks like we can thank the rise in U.S. bond yields for that since there wasn’t really anything else.
USD/JPY was up by 17 pips (+0.16%) to 109.37, USD/CAD was up by 22 pips (+0.17%) to 1.2869, USD/CHF was up by 36 pips (+0.37%) to 0.9912
The Kiwi extended its losses from earlier and was the worst-performing currency of the session. In fact, the Kiwi is currently the worst-performing currency of the day, even though risk-taking prevailed for the most part.
There were no direct catalysts that could have sustained the Kiwi’s weakness, so we’re probably just seeing an extension of last week’s themes, namely the Kiwi’s vulnerability to Greenback strength due to monetary policy divergence between the Fed and RBNZ, as well as the higher bond yields weakening the Kiwi’s yield advantage.
NZD/USD was down by 30 pips (-0.43%) to 0.7043, NZD/CHF was down by 8 pips (-0.11%) to 0.6981, NZD/JPY was down by 23 pips (-0.30%) to 77.01
The euro barely edged out a win against the Kiwi, thereby avoiding the bottom rank.
Selling pressure on the euro began to ramp up right when the morning London session rolled around and after Germany’s retail sales report failed to impress, so that may have been the catalyst for the euro’s slide.
It’s also possible that some traders are worried about the effects of the Trump’s trade tariffs on the Euro Zone economy. Although the negative side effects shouldn’t be that big in theory.
Other than that, market analysts were also blaming the euro’s overall weakness on Greenback strength.
EUR/USD was down by 57 pips (-0.48%) to 1.2077, EUR/CHF was down by 12 pips (-0.10%) to 1.1971, EUR/JPY was down by 42 pips (-0.32%) to 132.08
Watch Out For:
- 12:30 pm GMT: Canada’s RMPI (0.6% expected vs. -0.3% previous) and IPPI (0.2% expected vs. 0.1% previous)
- 12:30 pm GMT: U.S. core PCE price index (0.2% expected, same as previous), personal spending (0.4% expected vs. 0.2% previous), and personal income (0.4% expected, same as previous)
- 1:45 pm GMT: Chicago PMI (58.0 vs. 57.4 previous)
- 2:00 pm GMT: U.S. pending home sales (0.5% expected, 3.1% previous)