TALKING POINTS – YEN, AUSTRALIAN DOLLAR, TRADE WAR, G7, TRUMP
- Yen down, commodity currencies up as risk appetite improves
- Aussie Dollar leading the way higher after strong GDP data
- Trade war fears before G7 summit may sour markets’ mood
Swelling risk appetite defined currency market price action in Asia Pacific trade. The sentiment-geared commodity bloc currencies led the way upward, with the Australian Dollar outperforming following an impressively upbeat set first-quarter GDP figures. On the other side of the spectrum, the perennially anti-risk Japanese Yen was weakest among the G10 FX majors.
The MSCI Asia Pacific regional shares benchmark rose to a three-week high, building on a positive lead from Wall Street. There, the bellwether S&P 500 index rose to the highest level in almost three months. Italy’s new Prime Minister Giuseppe Conte swore off taking his country out of the Eurozone, US service-sector growth topped forecasts and Treasury Secretary Mnuchin urged a softer stance on trade with Canada and China.
Looking ahead, a relatively muted offering of economic data is likely to keep risk appetite trends in focus. Futures tracking European and US equity benchmarks are pointing convincingly higher, suggesting established momentum has scope for continuation. Optimism may prove fleeting as traders weigh up the upcoming G7 leaders’ summit however, where trade war tensions may well boil over.
At the meeting, US President Donald Trump will face the ire of allies in Canada and the European Union after their exemptions from this year’s hike in aluminum and steel tariffs were allowed to lapse. Markets seem content to see Mr Trump’s bellicose stance as a negotiating tactic, expecting a swift settlement before real economic damage can be done. If escalation starts to seem more likely, sentiment will swiftly sour.
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ASIA PACIFIC TRADING SESSION
EUROPEAN TRADING SESSION
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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