Analysts at Westpac explained that sentiment remained nervous in European trade but stabilized in NY, albeit with limited inspiration from news or data.
Key Quotes:
“The Chinese yuan continued its decline.”
“St. Louis Fed president Bullard was dovish as usual, arguing that the Fed should slow or even halt rate increases. He also said he was “hearing full-throated angst” from business contacts about US trade policy. The US 10yr treasury yield bounced off 2.82% (a one-month low) to 2.85%, 2yr yields from 2.49% to 2.52%. Fed fund futures yields continued to price 1 ½ more hikes in 2018.”
“Markets were mixed in London and NY trade, with equities weak in Europe but a little higher in the US and bond yields mostly little changed overall. The Chinese yuan will remain a focus today for the Aussie, as CNH continued its decline in NY trade, to touch 6.64 versus USD.”
“EUR/USD is flat over the day, having traded roughly 1.1530-1.1600. GBP/USD softened about 0.3% to 1.3075 despite Bank of England chief economist Haldane explaining why he voted for a rate hike last week. USD/JPY rose from 110.30 to 110.65, a little firmer than might have been expected.”
“AUD/USD ranged sideways between 0.7330 and 0.7360, consolidating the previous day’s fall to a low since Jan 2017. NZD underperformed in the wake of the RBNZ’s slightly dovish policy review, extending losses from 0.6780 to 0.6746 – the lowest since June 2016. AUD/NZD rose 0.7% over the day to 1.0880.”
“CAD was strongest in the G10 on the day, presumably helped by WTI crude oil touching $74/bbl for the first time since Dec 2014. USD/CAD dropped from 1.3340 to 1.3260.”
“The impact of European data releases was minimal as markets awaited the outcome of a critically important 2-day EU Leaders’ Summit, which began today. Their heavy agenda is frontloaded with the increasingly contentious debate over migrant policy both with respect to EU’s external borders and the mobility of migrants within the EU. The issue is straining political consensus across the EU (highlighted by the new Italian government’s stance) and within individual countries (Merkel’s hard negotiated coalition in Germany could split over the issue). International trade (with Trump’s US), EU budgets, the banking and finance sector, and Brexit are all to be debated as well.”
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