Forex today experienced risk-on market environment following the optimism on the Wall Street overnight on US-Mexico trade deal. More so, reports that the US President Trump and Germany’s Chancellor Merkel agreed on more talks on the US-EU trade barriers also boosted the risk-on trade in the Asian markets. Meanwhile, the US dollar staged a comeback from three-week lows of 94.68 and managed to regain the key 94.80 level, putting pressures on most majors.
Amongst the Asia-pac currencies, the Aussie was the weakest amid the renewed Yuan weakness and falling copper prices while the Kiwi also followed suit and dropped below the 0.67 handle. The USD/JPY pair traded firmer near 111.30 levels, as Treasury yields turned positive while the safe-havens Yen and gold took a backseat amid risk-on.
Main topics in Asia
Dollar Index hit three-week lows below 50-day MA
PBOC set the Yuan reference rate at 6.8052
HKMA intervenes by buying HKD 3.93 bn today to defend the peg
New Zealand PM Ardern: Won’t relax budget responsibility rules
White House Advisor Kudlow: Trump wants a good deal with Canada
Trump: ‘It’s not the right time to talk to China about trade war’
Flattening yield curve may be signaling rising recession risk – Fed study
Key Focus ahead
The European calendar remains data-light for the second-day in a row, despite full markets returning, with the only Eurozone money supply data due on the cards at 0800 GMT. The UK docket remains data-empty and hence, the Brexit-related developments and US-EU trade news will drive the market sentiment ahead of the NA session.
The US calendar also remains quiet, as the CB consumer confidence data is likely to offer some trading impetus among other minority reports.
The EUR could extend the two-day winning streak if the European equities pick up a strong bid on reports Trump, Merkel support EU-US trade talks. However, if the equities respond negatively to the flattening treasury yield curve, then the USD may gain on the safe-haven appeal.
GBP/USD headed to 1.2850 amid US dollar bounce, Brexit-jitters
The GBP/USD pair faced rejection once again just ahead of the 1.29 handle in Asia, now sending the rates back to test the 1.2850 support, as we head towards a data-empty UK docket.
US: Focus on second estimate of Q2 GDP this week – NBF
In the U.S, the second estimate of Q2 GDP will be available on Wednesday and will be a key economic release for the week, according to analysts at National Bank Financial.
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