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The higher-yielding Aussie and Kiwi were forced to give back some of their gains from the earlier session, likely because of the returning risk-off vibes in Europe.

The safe-haven currencies (USD, JPY, CHF), meanwhile, were initially in a three-way race for the top spot.

However, the euro was rushed by buyers late into the session. And buying pressure was strong enough that the euro was able to quickly outpace all the safe-havens to pull off an upset victory.

  • Italian industrial production m/m: -1.0% vs. -0.4% expected, 0.3% previous
  • Italian industrial production y/y: 2.9% vs. 1.4% expected, same as previous

Major Events/Reports:

China vows to retaliate against the U.S.

China’s Ministry of Commerce issued a statement earlier. And the Ministry was basically saying that China will retaliate against the fresh round of tariffs. However, specific measures weren’t mentioned.

Fortunately, Chinese Foreign Ministry Spokesperson Gengh Shuang held a presser later on, so journalists jumped on the opportunity to ask for more details.

Unfortunately, Geng Shuang also refrained from divulging any of the deets, saying only that “China will naturally announce it when appropriate.”

Geng Shuang was also asked if trade talks are now off the table, and he replied as follows:

“China has repeatedly stressed that dialogue and consultation on the basis of equality, integrity and mutual respect are the only correct way to solve the Sino-US economic and trade issues. What the US is doing now does not reflect sincerity and goodwill.”

Risk-taking prevails (but losing steam)

Despite the earlier news that the U.S. slapped fresh tariffs on Chinese goods, the major European equity indices actually had a running start, thanks to some relief buying and because a “sell the rumor, buy the news” scenario played out, market analysts say.

However, sellers eventually began to return and most of the major European equity indices began giving back their gains after China announced that it will retaliate against the U.S.

  • The pan-European FTSEurofirst 300 was still up by 0.11% to 1,480.40 but off the day’s high at 1,483.85
  • Germany’s DAX was still up by 0.20% to 12,118.81 but off the day’s high at 12,185.55
  • The blue-chip Euro Stoxx 50 was still up by 0.09% to but off the day’s high at 3,351.15 3,368.25

Major Market Mover(s):

EUR

The euro was initially on track to closing out the session as a net loser. Fortunately for the euro, it found buyers across the board at around 10:00 am GMT and quickly erased its losses (and then some). Heck, the euro was even the top-performing currency of the morning London session.

As to what enticed euro bulls to jump in, that’s not yet very clear since there were no apparent catalysts and market analysts were only pointing out that the euro was in demand without really citing a reason.

EUR/USD was up by 7 pips (+0.06%) to 1.1706, EUR/AUD was up by 42 pips (+0.26%) to 1.6251, EUR/NZD was up by 33 pips (+0.19%) to 1.7752

AUD & NZD

Both the higher-yielding Aussie and Kiwi are still net winners for the day (so far). However, they encountered sellers and were the biggest losers of the morning London session.

And China’s announcement that it will retaliate against U.S. tariffs appears to be the direct catalyst since the Greenback (and Swissy and yen) jumped when that announcement was made, but the Aussie and Kiwi got rather noticeable bearish kicks.

AUD/USD was down by 13 pips (-0.18%) to 0.7203, AUD/JPY was down by 23 pips (-0.28%) to 80.76, AUD/CHF was down by 17 pips (-0.25%) to 0.6923

NZD/USD was down by 5 pips (-0.09%) to 0.6593, NZD/JPY was down by 14 pips (-0.19%) to 73.92, NZD/CHF was down by 9 pips (-0.15%) to 0.6337

Watch Out For:

  • 12:30 pm GMT: Canadian manufacturing sales (0.6% expected vs. 1.1% previous)
  • 2:00 pm GMT: NAHB’s U.S. housing market index (66.0 expected vs. 67.0 previous)
  • 9:00 pm GMT: Westpac’s consumer sentiment in New Zealand (108.6 previous)
  • Dairy auction currently underway (-0.7% previous); auction usually ends at around 2:00 pm GMT