Weekend Developments - Euro Gaps Higher, Pares Gains
Over the weekend, reports crossed the wires that US President Donald Trump labeled the European Union as a “foe”, citing trade tensions as the reason. However, a couple of hours later European Council President Donald Tusk stepped in and claimed this update was ‘fake news’. Mr. Tusk added that the two are ‘best friends’. The Euro thus saw some volatility at Monday open. First gapping higher, and then paring its gains.
Friday’s US Session Developments – GBP Recovers as Trump Apologizes to May
The Euro was not the only currency being pushed and pulled by conflicting headlines recently. During Friday’s US trading session, the British Pound recovered against its major counterparts. Its appreciation was accompanied with Mr. Trump apologizing to UK Prime Minister Theresa May after his earlier remarks about her soft Brexit plan jeopardizing any future trade deals with them.
With that in mind the US Dollar, which rallied as the British Pound initially fell, pared gains during the second half of Friday’s session and finished the day little changed. Meanwhile, another solid Chinese trade surplus with its US counterpart rekindled concerns that the Trump Administration would continue pursuing harsher tariffs. The anti-risk Japanese Yen rose while the sentiment-linked New Zealand Dollar fell.
Current Developments/A Look Ahead –Asian Stocks May Gain as Yen Falls
Speaking off, the New Zealand Dollar brushed off a rather disappointing services PMI report. In June, the NZ Performance of Services Index fell to 52.8 from 57.1 in May. This was the weakest outcome since December 2012. Keep in mind that a reading above 50 indicates expansion and vice versa. NZD’s minimal response likely reflects the data’s limited implications for RBNZ rate hike bets.
Rather, sentiment-linked currencies (including the Australian Dollar) may have some scope to gain ahead. Donald Trump dialing back his trade threats on the UK and potentially the EU could offer Asian equities the fuel to rise. Such a scenario bodes ill for the anti-risk Japanese Yen. Finally, AUD could see some volatility on the upcoming China GDP release. But like the RBNZ, it likely has minimal implications for RBA rate hike expectations.
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Five Things Traders are Reading:
- EUR/USD Weekly Technical Outlook: Higher-low, Support Test, or Nothing? Paul Robinson, Currency Analyst
- EURUSD, Dow, Oil Will Start New Week with Ranges and a Fear of Trade Wars by John Kicklighter, Chief Currency Strategist
- Australian Dollar Could Be Stuck Between RBA Minutes, Jobs Data by David Cottle, Analyst
- USD/JPY Forecast: Dollar Strength to Persist on Hawkish Fed Testimonyby David Song, Currency Analyst
- USD: Trade Wars vs Strong Economic Fundamentals - The Battle Continues by Nick Cawley, Analyst
--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter