Market Drivers May 16, 2019
Risk revives sending buck lower
AUD labor data misses
Nikkei -0.59% Dax -0.10%
Oil $62/bbl
Gold $1295/oz.

Europe and Asia:
AUD AU Unemployment 5.2% vs. 5.0%
EUR EU Trade 17.9B vs. 19.4B

North America:
CAD ADP 8:30
USD Philly Fed 8:30

FX markets were steady in morning European dealing with a slight risk on tone despite tough talk from China on trade.

The Chinese responded to the latest salvo from Trump by stating that, “China will take all necessary measures to protect its firms.” The line initially sent equities lower by 0.4% in Asia but buyers returned to the fold through early European trade with indices paring losses down to 0.1%.

The rebound helped risk FX, especially the EURUSD which benefited from positive Trade balance data that showed exports rose 0.9%. EURUSD ran to 1.1220 but remains contained by the 1.1250 level for the time being.

Cable, however, remained weak trading near lows of the session at 1.2820 as UK politics continues to weigh on the pair. The Tory-Labor talks have shown no signs of progress and it appears likely that Theresa May could face a no-confidence vote by June which would only add to the turmoil.

On the eco front, there was only one major release last night – the Aussie employment data which came in mixed but actually lower. The unemployment rate climbed to 5.2% from 5.0% the period prior, but headline data actually beat at 28K vs. 14K eyed. Still, all the gains were in temporary jobs while full-time jobs lost more than 6K. The news points strongly to an RBA cut in June, although the data was ambiguous enough to cast some doubt on the move which is why Aussie bounced off the .6900 figure. Still, the forward curve is pricing as much as 75bp of cuts by 2020 and if US-China trade war escalates further the RBA will almost certainly have to adopt a much more accommodative stance. For now, the pair has found support at the .6900 level and will only retest it if risk flows turn negative once again.

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