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ForexLive European FX news Wrap: Dollar, yen slightly firmer;  Evergrande default, PBOC slows down yuan strength


Securities:

Markets:

  • JPY in the lead, AUD behind the day
  • European equities fell slightly; S&P 500 Futures Down 0.3%
  • US 10-year yields drop 1.2bp to 1.497%
  • Gold down 0.3% to $ 1,776.80
  • WTI down 0.8% to $ 71.77
  • Bitcoin Down 2.8% to $ 49,232

The optimistic glow of yesterday is getting rather dull so far today. The mood in the market is rather subdued as traders and investors start to turn the page on major central bank meetings next week.

Evergrande’s official default on its offshore bond payment didn’t help in terms of overall risks. However, even with Fitch downgrading both the company and Kaisa, it didn’t really shake up domestic markets. As such, any ripple effects in larger markets are rather contained.

But we see a pause in recent optimism this week for now. There is much to consider in the coming week, with key central bank meetings adding to the expectation of more news on the omicron front.

US futures point to slight losses while European indices have seen slow progress so far. Even the bond mindset is lacking in enthusiasm with 10-year Treasury yields falling below 1.50%.

In the forex market, this helps the yen advance, with the USD / JPY slipping from 113.60 to 113.36. The pair is finding some support from the key short term levels around 113.34-43 which holds for now.

Meanwhile, EUR / USD is down slightly from 1.1340 to 1.1310 as the dollar remains slightly stronger overall.

Commodity currencies saw their gains retreat for the week, with AUD / USD down 0.4% to 0.7140 from around 0.7170 earlier.

In other news, the PBOC also decided to curb the strength of the yuan by increasing the RRR exchange rate. This saw the yuan fall back to 6.36 after breaking above 6.35 against the dollar.

It sounds more like a decline in risk optimism in recent days than anything else. Oil is also down 0.8% to $ 71.77, but that only squeezes the gains from the start of the week.

As the market’s attention slowly turns to major central bank meetings next week, we may be in store for some extra pushes and pulls ahead of the weekend.


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