European Summary and Highlights 25 July
The USD was mixed through the European morning in what was generally a risk negative session of trading.
European morning session
The USD was mixed through the European morning in what was generally a risk negative session of trading. USD/JPY lost around 35 pips to 152.25, after hitting a low slightly below 152, while EUR/USD edged up around 10 pips to trade above 1.0850. USD/CHF lost 50 pips to 0.8880, but AUD/USD was 25 pips lower at 0.6525. Scandis were also weaker, with EUR/NOK hitting an all time high above 12.06 (pandemic spike excluded), and EUR/SEK also rising 0.5% to 11.75. GBP/USD was little changed.
The background to this was more equity market weakness, with European equities down around 1.5%, and European yields also slipped lower. Newswise we saw a weak French INSEE survey which produced the lowest index since 2013, and a weaker than expected German IFO, although this was less of a surprise after yesterday’s softer PMIs. The Eurozone M3 data was stronger than expected, rising 2.2% y/y, but household lending growth remained weak at 0.3% y/y.
Asia session
The USD/JPY sunk another percent on Thursday's Asia session as the reversal of funding trades continues. While it is hard to identify causation, the correction of USD/JPY coincide with the correction of Nasdaq which further spreads to other U.S. major equity indexes. There is little intel from the Japan side what BoJ may do but bond purchase cut seems to be concrete with little speculation of a rate hike. USD/JPY is trading 0.79% lower at 152.62 with session low at 152.23.
The PBoC has cut 1yr MLF to 2.3% from 2.5%. It came as a surprise because of the magnitude is greater than the earlier cut on Monday. Other Chinese banks also cut their deposit rate by 0.1-0.2%. It looks like to be another attempt form the Chinese government to support the local economy but the equity market is not cheering with broad sentiment negative. AUD/USD is dragged 0.57% lower at 0.6245, being double teamed by poor sentiment and falling Yuan. NZD/USD fared better but still fell 0.29% to 0.5913 while USD/CAD rose 0.09% on lower oil. Else, EUR/USD is unchanged and GBP/USD down 0.15%.