Europe Summary and Highlights 15 May
Trumps hawkish tone on Iran continues, overstretched risk markets feeling some gravity
Dollar continues squeeze, taking out some levels, adding to broader corrective action
European morning session
The last couple of sessions have seen both a more risk-off tone (correction of recent accelerating risk markets) and a dollar squeeze take hold in tandem and this extended over the European morning. Over stretched risk and commodity complex trades are suddenly finding the lack of Iran resolution, oil upside, US yield breaks higher, and the dollar upside taking out some levels, as challenging the overbought runs - thus feeding back into the stronger dollar tone.
Trump: losing patience on Iran, military destruction of Iran 'to be continued'.
Popular counters thus suffering on the day, AUD/USD off 1%+ and NOK (threatening a weekly outside reversal) likewise profit-taking and position trimming triggered even as Brent almost up $4.
On the back of the US moves and local news, gilts off 1.5pts back to the week’s lows. No10 indicates it will not stand in the way of Burnham standing in the by-election, opening the way for a challenge, though he does need to win what is a contested seat against a motivated Reform party to do so.
GBP/USD has seen a low of 1.3325, EUR/USD a low of 1.1617-, EUR/GBP as high as 0.8727- on initial cable leadership before levelling on the EUR/USD catch up.
Equities softer following overnight action, Dax off around 1 ½ %, back to the week lows.
Asia session
Broader market sentiment sours as the Xi-Trump meet ended without significant fruit. There are scattered deals on Boeing and other purchase but those aren't the major sticking point. Even when we hear from China foreign ministry saying "we" should reopen Hormuz asap, there is a lack of concrete action plan to persuade the market.
Moreover, Fed speakers talked down the likelihood of rate hikes, given the current macroeconomic picture, extinguished the hope of speculators. Most major equity indexes are in the red, so as precious metal. AUD/USD is trading 0.61% lower at 0.7176. NZD/USD is trading 0.7% lower while USD/CAD rises 0.21% with both Brent and WTI higher.
With USD gaining broadly on risk aversive Friday, USD/JPY inevitable goes north and have its eyes on the 160 mark. We haven't heard any jawboning for the past few days but the current trajectory guarantees one is near. The jump in long end yields are also alarming with 10yr JGB yields up by 10% in a week, suggesting market confidence in Japan government is fading again in the likelihood of extra energy stimulus. USD/JPY is trading 0.1% higher at 158.51. Else, EUR/USD is down 0.2% and GBP/USD is down 0.31%.