Euro edges lower as risk-off mode dominates trading

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30 May 2019


It has been a relatively quiet past 24 hours or so in the foreign exchange market, with little political or economic news on tap leading to fairly range bound trading among the major currency pairs.

ith concerns lingering regarding the US-China trade tensions, appetite for risk remained lacking in the financial markets. A relatively sharp sell-off in equity markets, which saw the S&P500 index slide back below the 2800 mark and Dow Jones decline to its lowest level in three months, also added to the risk-off mode.

The Euro ticked around a third of a percent lower against the US Dollar during trading yesterday as a result, with the Japanese Yen very briefly touching a two week high. Comments from a Chinese diplomat on Thursday that the US was engaging in ‘naked economic terrorism’ has exacerbated matters and adds to concerns that a trade deal could be some way off.

Next up for the US Dollar will be this afternoon’s revised first quarter GDP numbers. With no significant deviation from the initial estimate expected, any sort of surprise here would catch the market off guard. In the absence of any surprises in the number, PCE index data and a speech from FOMC member Clarida could prove market movers.

Canadian Dollar slides on ‘neutral’ BoC stance

With major announcements at a premium yesterday, attention was on the Bank of Canada and its latest monetary policy meeting.

The Canadian Dollar fell to its lowest level in five months after the BoC struck a slightly less hawkish tone than the market had been anticipating. Policymakers in Canada affirmed a ‘neutral’ stance with regards to its future policy moves, suggesting that moves in rates in any direction are unlikely in the near term. The BoC stated that the slowdown around the turn of the year was temporary and that there would likely be a pickup in the second quarter.

In the UK, Sterling teetered around a four month low as investors continued to fret over the possibility that the UK leaves the EU with no deal in place later in the year. Tory leadership candidates continued to chime in on Brexit yesterday, with MP James Cleverly the latest to throw his name in the hat. Boris Johnson, however, continues to remain favourite to be next PM, with betting odds now placing around a 36% implied probability of his appointment. Until the next PM is named, we could see Sterling remain in a holding pattern.