In forex today, the Asian market session produced little volatility as traders take stock of how things have developed over the week, and Friday’s proceeding European and US sessions will decide how the week wraps up.
American equities saw continued declines to finish off Thursday’s trading, and Asian stocks followed suit as investors continue to grapple with global stability headwinds stemming from a US Federal Reserve on the hawkish war path, the ever-present US-China trade war, and continued Brexit struggles that continue to see plenty of rhetoric thrown at headlines bit little in the way of progress. China’s GDP figures also clocked in a contraction in the headline growth reading in the Asian markets, though the AUD/USD was surprisingly undeterred in spite of the economic warning signs from their largest trading partner, competing with the USD/JPY as the gainer of Friday’s first third. The AUD/USD picked itself up off of the floor to trade back into 0.7110, gaining some 20ish pips in the process, while the USD/JPY continued a bullish recovery from Thursday’s low of 111.95 and is now trading near 112.40 as Dollar traders brought the major pair back to more acceptable levels.
EUR/USD: Downside exposed as Italy yield spreads spike, US-DE spreads continue to rise
Italy worries continue to hang over the EUR, and Italian debt markets are driving the yield differential between Italian and German government bonds to extreme readings as the fracas between Italy’s spend-happy government budget plans and the EU’s fiscally-staunch leadership in Brussels, while the Euro continues to swoon against the Greenback as markets adapt to a US Fed that openly considers the concept of ‘above-neutral- interest rates.
GBP/USD is approaching two-month rising trendline on Brexit impasse
Brexit finagling continues to go nowhere quickly, and as FXStreet’s own Omkar Godbole noted, “UK’s Theresa May signaled yesterday that she would consider extending the transition to allow more time for UK and EU negotiators to solve problems around key issues like the Irish border. Further, the European Commission’s Jean-Claude Juncker said that any request for an extension to the Brexit transition period by the UK would be considered “positively” and likely be accepted. Still, the Pound struggled to pick up a bid in Asia as markets believe that Theresa May will have a hard time selling the extension at home. Moreover, as Reuters report says, May’s strategy is being criticized by both sides – Brexit supporters accuse her of making Britain a vassal state while the EU supporters say the offer is the worst of all worlds.”
With the clock beginning to run down on making a passable Brexit deal, the strategy is quickly evolving into simply leaving the UK hung on the EU’s customs union for an undefined amount of time as the two sides continue to come to loggerheads on a final Brexit solution, an option that leaves Eurosceptics within the UK’s own parliament heated under the collar, and EU officials frustrated at UK PM May who continues to chase down unrealistic deal scenarios.
Key notes from Asia
China’s GDP dips to 6.5%, missing expectations
Systemic risks are being brought under control – China Banking and Insurance Regulatory Commission
China’s central bank chief: stock market valuations not in line with China’s economic fundamentals
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