European Summary and Highlights 5 August

European morning session

A volatile European morning session initially saw the JPY fall back after overnight gains, with USD/JPY gaining 2 figures to 144, but the early USD/JPY rally was reversed by the end of the session, with USD/JPY once again dipping below 142. EUR/CHF gains were more sustained, rising above 0.93 from an early dip to 0.9210. EUR/USD finished slightly higher at 1.0955 after an initial dip from 1.0940 to 1.09, while GBP/USD was marginally lower at 1.2770 from an open near 1.28, although this was a recovery from the lows at 1.2720. AUD/USD recovered to late Asia levels around 0.6450 after an initial sharp dip to 0.6350. Scandis were net little changed in Europe after losses in late Asia.

Equity futures were also net little changed after the big Asian losses, as were US yields, although European yields were slightly lower. There was no news of any real note, with final services PMIs little changed from the preliminary releases. The first release of Swedish services PMI showed its third consecutive rise, but was still below the March high of the year.

Asia session

After the bloodbath on Friday, Nikkei continues to search for new lows as risk averse sentiment grasp the market after softer Friday NFP. In the first opening hours, Nikkei has dropped more than 6% and has essentially erased the gains since beginning of the year. While the move is widely triggered by global risk off sentiment, the tightening steps that is too hawkish from the BoJ cannot be neglected. The Nikkei has extended its losses to 8% after struggling to stand in the Asia session. U.S. three major equity indexes are also in the red, led by the 3% losses in NASDQ while regional equities in China and Hong Kong fared better with the Chinese equities squeezing out a free pips of gains. Both the U.S. Treasury and JGB yields sunk. USD/JPY is now trading 2.25% lower at 143.18 with session low at 142.15.

Despite regional equities are faring better, the USD is preferred in times of broad risk off atmosphere. The Australian private inflation survey also shows inflation expectation to continue to tread lower which may push back RBA's stance in late easing. The AUD/USD is down 0.3% at 0.6492, NZD/USD also slipped 0.26% to 0.5941 while USD/CAD is up 7 pips with oil down more than a dollar. Else, EUR/USD opened more than 10 pips higher and is still 0.21% while GBP/USD down 0.1%.