Calm returned to the markets overnight, the dollar backs off recent highs
Scott Petruska, CFA | May 30, 2019
The dollar moved off its recent highs against peer currencies, as calm returned to the financial markets. Asian equity markets sold off slightly, European markets edged higher, but overall there was little movement. Global bonds yields remain near their lowest levels since 2017. US-China trade tensions are high with possibilities of China cutting exports of rare-earth minerals to the US.
“That man is prudent who neither hopes nor fears anything from the uncertain events of the future.”Anatole France, French poet
May 30, 2019
EUR/USD 1.1131 GBP/USD 1.2618 USD/CAD 1.3495 AUD/USD 0.6919 USD/JPY 109.65 USD/CNH 6.9262 USD/ILS 3.6294 USD/MXN 19.1563 USD/CHF 1.1220 USD/INR 69.8750
Markets took a breather overnight, with the dollar backing off recent highs. Equity markets edged higher and bonds held steady, reducing the dollar’s demand as a safe haven.GBP
The UK pound is trading near recent lows. Pressure on the pound remains high following the resignation of PM May, as the odds increase for a “hard” Brexit – leaving the EU without a deal. Former mayor of London and ex-Foreign Secretary Boris Johnson, a passionate Brexiteer, is the frontrunner to replace May.EUR
Light activity was seen in European financial markets. German markets were closed for Ascension Day, and there were no important economic releases or events in the eurozone.CAD
The USD/CAD dropped back below 1.35 following a rally in oil above $59. An industry report showed a bigger-than-expected decline in U.S. oil reserves.ASIA/PACIFIC
The Chinese yuan moved little overnight, despite Chinese media raising the prospect of China cutting exports of rare-earth minerals. China supplies 80% of US imports of such commodities used in the defense, energy, auto and electronic sectors. China also announced they have put purchases of US soy products on hold. Separately, the People’s Bank of China injected $36 billion into China’s financial system to fill a funding gap following the surprise seizure of a local bank with serious credit risks. The move also was meant to provide a strong signal to markets that they stand ready to safeguard liquidity as sentiment in both the credit and bond markets is shaky.ILS
A political shake-up in Israel has led to a weakening of the Israeli shekel. Recently re-elected PM Benjamin Netanyahu had failed to form a coalition government within its six-week time limit, so Israeli’s parliament voted to dissolve itself. New elections are scheduled to be held on September 17th.
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