Risk Markets Recover Over Quiet European Morning
USD Recovers Following Data Slump
The US dollar has been higher again over the European morning. It recovered some of the losses suffered yesterday following weak data. US Retail Sales printed -0.2% in April vs an expected 0.2% reading. The index continues to trade in the middle of the 97.10 – 97.68 range, trading 97.33 last. Looking ahead today, we only have initial jobless claims on the US data sheet worth monitoring.
EUR Lower As Risk Recovers
EURUSD has traded lower again so far today. Price broke back down beneath the 1.1217 level. With little on the EZ data sheet, flows are mostly USD driven. The unwinding of EUR equity markets over recent weeks has kept EUR supported. Traders are buying back their EUR hedges. However, this has dried up a little over the last few sessions.
Pound Down on Brexit Woes
GBPUSD has stabilized so far today following further losses over the Asian session. The market is currently skeptical about Theresa May’s chances of securing parliamentary approval for her Brexit deal. As announced recently, she will be putting her new deal up for a fourth and final vote in June.
Risk Markets Stabilise
Risk markets have traded a little more enthusiastically over the European morning. SPX500 is trading back up to test the 2856.30 level. Risk appetite has recovered somewhat, following news earlier in the week that China has retaliated with 25% tariffs of its own on US imports. However, this recovery could prove temporary. Trump is still deciding on whether to tax the remaining $300 billion of Chinese goods entering the US yearly.
Safe Havens Down on Risk Recovery
The recovery in risk appetite mid week has weighed on safe havens which have traded lower on safe haven outflow. Both the Japanese yen and gold are lower against USD so far today. XAUUSD has now broken back down beneath the 1298.32 level which was broken on Monday in response to news of Trump considering further tariffs. USDJPY is climbing back up toward the 109.70 level following a breakdown below the level on Monday. While below, focus remains on further downside.
Crude Rallies on Despite Bearish EIA Report
Crude oil has been higher again today despite a bearish report from the EIA. The group’s latest weekly report showed an unexpected 5.4 million barrel increase in US crude stocks along with surging net exports. However, crude remains supported by ongoing tensions in the Middle East in the wake of Iranian attacks on Saudi oil tankers. Crude prices are now challenging the resistance trend line of the corrective bull flag formation, suggesting the chance of a return to the longer term bullish trend on a break.
Commodity Currencies Recovering on Oil Rally
The rally in crude this week is keeping CAD well supported. USDCAD is breaking down firmly below the 1.3469 level. Price is now challenging the rising trend line from the mid-April lows. Below here, the 1.3391 level is the next key support to watch.
AUDUSD has been lower again today, retracing some of the gains made overnight on the recovery in risk appetite. Concerns around the escalating US/China trade war have heightened expectations of an RBA rate cut in the coming months keeping AUD pressured. AUDUSD trades .6925 last, still well below the .6982 level broken at the start of the week.