There wasn’t much on the forex calendar and some of the major European economies were away on holiday.
Even so, there were a few, noticeable themes that were playing out during the session. And most notable among these are the euro’s broad-based rise and the Greenback’s slide.
Steady demand for the Aussie and Kiwi were also notable. In fact, the Aussie was the top-performing currency of the morning London session.
- Many European banks are closed in observance of Whit Monday
- No economic reports were released during the European session
- Italian President Mattarella will meet with the 5-Star Movement and the League party later
- Mattarella may name a PM and approve a coalition government by today
Will Italy have a new government?
Sergio Mattarella, the President of Italy, is expected to meet with 5-Star Movement’s Luigi Di Maio at 4:30 pm GMT.
Mattarella is then expected to meet with the League party’s Matteo Salvini at 5:00 pm GMT.
And according to news reports, Mattarella will be discussing who the next Italian Prime Minister will be, as well as approve the formation of a new coalition government after weeks of political limbo.
ECB’s Nowotny speaks
ECB Governing Council Member Ewald Nowotny was speaking in Prague earlier. And when he was asked to comment about the situation in Italy, he had these to say (courtesy of a Reuters report):
“It is something that creates a lot of nervousness, but of course on the other hand one has to wait. We do not see the effect of measures, we don’t see what really comes out of it.”
“I hope that the practice will be a much wiser approach than what is here today from the newspapers.”
The Donald was up early and he tweeted the following:
China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products – would be one of the best things to happen to our farmers in many years!
— Donald J. Trump (@realDonaldTrump) May 21, 2018
On China, Barriers and Tariffs to come down for first time.
— Donald J. Trump (@realDonaldTrump) May 21, 2018
Optimistic start in Europe
Many of the major European bourses were closed because of the Whit Monday holiday. Not all were closed, though. And those that were open for the day were hinting at the prevalence of risk-taking since they were in the green.
And according to market analysts, the major European equity indices were in the green because market players are still elated over earlier news that the trade war between the U.S. and China is “on hold” after both economies agreed to drop their tariff threats (for now).
- The pan-European FTSEurofirst 300 was up by 0.39% to 1,554.56
- The U.K.’s FTSE 100 was up by 0.55% to 7,821.30
U.S. equity futures were also in positive territory, which is another sign that risk-taking was the name of the game in Europe.
- S&P 500 futures were up by 0.57% to 2,728.50
- Nasdaq futures were up by 0.65% to 6,918.50
Major Market Mover(s):
The Greenback’s rally stalled during the morning London session. In fact, the Greenback was the worst-performing currency of the session. For the day, however, the Greenback is still the second top-performing currency after the Aussie.
Anyhow, there were no clear catalysts for the Greenback’s retreat. U.S. bond yields did slide later on and may have weighed down on the Greenback. However, the Greenback started to dip a couple of hours before U.S. bond yields did.
USD/JPY was down by 11 pips (-0.10%) to 111.24, USD/CHF was down by 4 pips (-0.04%) to 0.9992, USD/CAD was down by 13 pips (-0.10%) to 1.2867
The euro was the second top-performing currency of the morning London session after showing mostly weakness during the earlier session.
And looking at price action and the available catalysts, it looks like the euro started to get bid higher after news got around that Italian President Mattarella will meet with the 5-Star Movement and the League party and may name a PM and approve a coalition government by today.
EUR/USD was up by 33 pips (+0.28%) to 1.1761, EUR/CHF was up by 29 pips (+0.25%) to 1.1753, EUR/GBP was up by 17 pips (+0.19%) to 0.8759
AUD & NZD
The higher-yielding Aussie and the Kiwi were in first place and third place respectively, likely because of the persistent risk-on vibes and Greenback weakness.
Commodities were in rally mode and may have helped to push the comdolls higher. However, gold and other precious metals were in the red so we can’t really point to higher gold prices for the Aussie’s strength.
AUD/USD was up by 23 pips (+0.32%) to 0.7530, AUD/CHF was up by 21 pips (+0.28%) to 0.7524, AUD/CAD was up by 20 pips (+0.21%) to 0.9690
NZD/USD was up by 18 pips (+0.26%) to 0.6907, NZD/CHF was up by 15 pips (+0.22%) to 0.6902, NZD/CAD was up by 15 pips (+0.17%) to 0.8889
Watch Out For:
- 12:30 pm GMT: CB’s Australian leading index (0.3% previous)
- 4:15 pm GMT: Atlanta Fed President Raphael Bostic will give a speech
- 4:30 pm GMT: Italian President will meet with 5-Star Movement’s Luigi Di Maio
- 5:00 pm GMT: Mattarella is expected to meet with the League party’s Matteo Salvini
- 6:05 pm GMT: Philadelphia Fed President Patrick Harker will speak
- 9:30 pm GMT: Minneapolis Fed President Neel Kashkari will be speaking
- Victoria Day holiday in Canada