Forex - European Highlights - 23 August 2019

 10:46 (GMT) 23 Aug

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European Highlights

European Highlights - 23 August 2019 (0101-NRFC-C01)

23 August 2019

Asia FX and News

+ Fed's Kaplan: Potential for Rate Cut at Sept. Meeting ~WSJ

+ N.Z. 2Q Retail Sales Excluding Inflation Rise 0.2% Q/q

+ Kiwi was the big mover in the Asian session as RBNZ Orr said to wait and see before considering further easing. That dialled back easing views slightly. NZD/USD jumped higher and stalled before 0.6395. AUD/NZD fell sharply to around 1.0575. A slightly weaker than expected NZ retail sales was shrugged off. Despite a stronger than expected yuan fixing, the yuan weakened. AUD initially dragged lower before quickly rebounded from just below 0.6750. USD generally firmer as market slowly seeing more risk of Powell sounding not as dovish as rates market suggests. USD/JPY rose with US yields and E-minis higher but gains in USD/JPY still within this week's highs.

Nikkei and JGBs -

Nikkei +0.40%, JGB 10yr yield at -0.232%

Europe FX and news

+ Very quiet European morning in FX awaiting Powell speech.

+ GBP saw some mild correction to yesterday's recovery, as markets remained unconvinced that Johnson's meetings with Merkel and Macron changed anything substantive on the Brexit issue. Anti-EU MPs also created some doubt that any deal would get through the House of Commons by indicating that a removal of the backstop would not be enough to convince them to vote for a deal. But early EUR/GBP gains petered out by the end of the morning.

+ CHF extended yesterday's losses with EUR/USD rising steadily above 1.09 helped by more positive equity performance and higher bond yields, suggesting a generally better risk appetite tone. Otherwise majors held close to opening levels against the USD after the USD made general gains in Asia.

Bonds and equities

US 10y yields are up 3bp to 1.645, erasing yield declines since in mid-August, with 5y-10y bonds underperforming resulting in a slight re-steepening of the US ahead of the Fed's Jackson Hole symposium which begins today. German 10y yields are 1.5bp higher at -0.635% with longs underperforming the most as 30y Bund yields retreat to back -0.07% rising by 3bp. UK Gilts are also trading lower as UK 10y yields rise by 4bp to 0.55% underperforming other markets as UK PM Johnson said he is hopeful on a re-opening of the withdrawal agreement to avoid a hard Brexit. Peripherals are also trading softer although Italian bonds outperform slightly as 10y BTP yields fall by 0.5bp to 1.30% after President Mattarella allowed until next Tuesday for negotiations among parties to form an alternative majority.


JP: Natl CPI (Jul) 0.5% y/y (Mkt: 0.6 Prev: 0.7)

Still to Be Released -

12:30 GMT - CA: Retail Sales (ex Auto) (Jun) 4cast: -0.3% m/m (Mkt: 0 Prev: -0.3)

12:30 GMT - CA: Retail Sales (Jun) 4cast: -0.3% m/m (Mkt: -0.3 Prev: -0.1)

13:00 GMT - BE: Business Confidence (Aug) (Mkt: -6.0 Prev: -5)

14:00 GMT - US: New Home Sales (Jul) 4cast: 675k (Mkt: 649 Prev: 646)

Events and Auctions:

03:30 GMT - JP: 3mth Bills Auction

10:00 GMT - UK: 181 days Bills Auction (GBP 3bln)

10:00 GMT - UK: 27 days Bills Auction (GBP 1bln)

10:00 GMT - UK: 90 days Bills Auction (GBP 2.5bln)

14:00 GMT - US: Fed's Powell speaks on Monetary Policy challenges at Jackson Hole

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