Europe Summary and Highlights 3 February
The USD was generally weaker through the European morning.
European morning session
The USD was generally weaker through the European morning. The JPY gained the most ground, with USD/JPY dropping 50 pips to 154.90, but USD/CAD also fell back 35 pips to 1.4675, and AUD/USD edged slightly higher to 0.6145. EUR/USD was not much changed at 1.0245 but GBP/USD gained 20 pips to 1.2310.
Equity futures recovered slightly from the lows hit in Asia, but are still some way short of filling the opening gap. All the market action was a reaction to the tariff announcements from the US and Canada and Mexico over the weekend, which strengthened the USD and weakened all the risky currencies. There was little interest in the Eurozone January CPI data, which came in slightly above expectations at 2.7% y/y core, 2.5% y/y headline, or the manufacturing PMI data which showed small upward revisions in both the Eurozone and the UK.
Asia session
Over the weekend, Trump announced that he has signed off the 25% tariff for Canada and Mexico (10% for oil) and an additional 10% for China. While it is hardly shocking as previewed in past month, market participants are reacting now and the USD jumped higher across majors at the opening bell, except JPY, lthough this also turned weak as most Asia market came online. The NZD/USD is currently falling the most by 1.66%, followed by USD/CAD 1.49% and AUD/USD 1.46%.
JPY is however broadly holding its own against the USD. As risk assets weaken, the JPY is receiving some haven bids along with the USD. U.S. major equity indexes are down more than 1.5% (Nasdaq 2.5% and Nikkei 2.8%) while regional equities in Hong Kong and Japan are also down more than a percent. USD/JPY is up 0.25% higher at 155.53 with both the U.S Treasury and JGB yields off opening highs. Else, EUR/USD is down 1.14% and GBP/USD is down 0.98%. None of the majors has come close to closing the opening gap, except JPY.