U.S – North Korea Summit Green Light Pulls Back the Dollar
The go ahead for the U.S North Korea Summit saw U.S Treasury yields ease, with the risk on sentiment pinning back the U.S Dollar with the politics to take center stage through the European session.
Earlier in the Day:
There were no material stats for the markets to consider through the Asian session this morning, leaving market sentiment towards geo-political risk to drive the markets through the morning.
Optimism that the U.S and North Korea are going ahead with the 12th June Summit saw U.S Treasury yields pullback early on, leaving the Japanese Yen holding flat against the U.S Dollar, the Yen up just 0.01% to ¥109.4 at the time of writing.
The softer U.S. Dollar saw the Aussie Dollar up 0.32% to $0.7572, with the Kiwi Dollar rallying 0.48% to $0.6950, the upside in the commodities currencies coming off the back of the planned go ahead with the June Summit, a continued fall in commodities doing little to hold back the pair through the session.
In the equity markets, the majors were mixed through the morning. The Nikkei managed to recover from negative territory to sit up 0.03% at the time of writing, while the CSI300 and Hang Seng rallied, up 0.68% and 0.56% respectively, as news of U.S Officials arriving in North Korea to begin preparations for the June Summit provided much needed support.
Things were not so good for the ASX200 however, last week’s bearish trend that pulled the index into the red year-to-date continuing through the start of the week, the index down 0.57%, with mining stocks on the slide. With the index facing a 7th day in the red out of 8, China’s manufacturing PMI later in the week will need to impress to stop the rot.
The Day Ahead:
For the EUR, economic data is on the lighter side through the day, stats limited to unemployment numbers out of France, which will unlikely have a material influence on the EUR this morning, the markets likely to be looking ahead to member state GDP numbers, domestic consumption figures and May’s prelim inflation numbers due out later in the week that could provide the EUR with some much needed support should the inflation numbers be in line with or better than forecast.
A pickup in the annual rate of inflation may not influence market sentiment towards ECB monetary policy however, with economic indicators disappointing and political woes in Italy and possibly Spain likely to be of concern.
At the time of writing, the EUR was up 0.64% to $1.1726, political updates out of Italy and Spain are likely to be the key drivers through the day.
For the Pound, with the UK markets closed today, there are no material stats scheduled for release to provide the Pound with direction in what is a particularly quiet week on the data front, key stats for the week limited to May’s manufacturing PMI due out on Friday.
With a lack of stats, focus will be on Brexit, with any Brexit chatter likely to be a negative for the Pound as the EU puts its foot down at the negotiating table.
The Pound was up 0.22% to $1.3338 at the time of writing, the gains coming off the back of a softer Dollar and some improved sentiment towards the UK economy following last week’s retail sales figures.
Across the Pond, it’s also a holiday in the U.S, with no stats scheduled for release, leaving the markets to consider what lies ahead, the economic calendar a particularly busy one for the Dollar, though direction may ultimately come from the Oval Office, with trade tariffs and North Korea amongst the key geo-political risks the markets need to consider.
At the time of writing, the Dollar Spot Index was down 0.40% to 93.876, with easing demand for U.S Treasuries pinning the Dollar back at the start of the week, risk sentiment supported by the announced go ahead of the North Korea – U.S Summit.