Monday kicked off the trading week with a comparatively low trading volume, and thin market conditions as the United Kingdom, Japan and South Korea were off for holidays. The economic calendar started with positive data from China as Caixin Services PMI beat the market expectations in April. European traders noticed a positive change in the Spanish unemployment rate, but Services PMI was in the red. French and German data supported the single European currency with local PMIs, while Eurozone Markit composite index and Retail Sales were unexpectedly hawkish. As a result, EUR/USD pared early Monday losses finishing the trading day with a long downside shadow on the candlestick as traders bought call options for the pair after optimistic economic reports. The North American trading session was also quiet as no reports were published. The US and global investors were listening to FOMC Members Williams and Harker, as well as BoC Governor Poloz.
Australian Retail Sales and Trade Balance surprised traders on the positive side on Tuesday, and the initial market reaction was to buy call options for Aussie pairs such as AUD/USD and AUD/JPY. However, the gains were limited and short-lived as the Reserve Bank of Australia had a rate decision in three hours after that. Although the regulator left the interest rate unchanged at the levels of 1.50%, the economic statement was more dovish rather than hawkish. RBA officials expressed concerns over global economic challenges and low exports volume but underlined robust employment growth and internal consumption. AUD/USD tested the resistance level at 0.7050 but slid later, finishing the trading day slightly above 0.7000 support. EUR/USD edged lower after Germany published factory orders and France announced trade balance in line with the market’s expectations. Binary options traders did not rush switching to call-mode after the US JOLT jobs openings report, which showed sustainable growth in the labour market. Canadian Ivey Purchase Managers Index jumped in April, confirming hawkish suggestions by several analysts regarding the local economic growth. However, the general traders’ sentiment was to buy call options for the greenback and USD/CAD climbed 1.3500 resistance despite reliable data.
The market players’ focus shifted to the New Zealand dollar early Wednesday as RBNZ met for the interest rate decision. The regulator followed its closest neighbour, staying pat on the financial conditions, but announced a rate cut later this year. It felt like the Reserve Bank of New Zealand started getting the markets ready for worse economic conditions as the official statement was dovish, and several concerns were indicated. Things developed even worse for the Kiwi as China’s Exports Volume fell and Trade Balance dropped. Although Imports Volume increased, binary options trader had comprehended that data as negative for developing countries and started purchasing put options for all risk currency pairs including NZD/JPY and AUD/JPY. USD/JPY also plunged as global equities were trading in a put-mode. German Industrial Production slightly improved in March after a decent decline in February but that did not help the single European currency. British Halifax Price Index climbed but again, the Sterling was sold-off on the back of risk aversion. ECB President Draghi hosted a press conference right after the regulator published its recent meeting minutes, stating that further monetary policy will depend on macroeconomic reports. However, investors ignored that news. The only significant event on the other side of the Atlantic was Crude Oil Inventories Report, which showed that consumption jumped in the United States and refineries could not provide enough level of supply. Inventories dropped to -3.9 million barrels after a massive spike to 9 million barrels in the previous week. WTI Crude oil price bounced off the bottom as global traders bought call options.
Thursday brought terrible news from the geopolitical side. Donald Trump expressed his disappointment in U.S.-China negotiations and imposed a new round of import tariffs. As a result, global stock indices dropped, capital flows were directed to safe-haven assets, while high-yield speculative positions were massively liquidated. Chinese PPI did not add optimism. In the currency market, the situation was mixed as the US PPI report missed the market consensus, adding chances for a rate cut by the Fed. The US dollar index dipped across the board, however, the structure of those losses was mixed and complicated. The thing was that traders bought put options for GBP/USD, USD/CHF and USD/JPY but at the same time call options for EUR/USD and USD/CAD were in demand. French CAC 40 benchmark led the losses, plunging for 2.5% in one single day on Thursday. Fed Chair Powell tried to rescue panicking markets, stating that the economic growth is still robust and the United States would deal with trade wars’ negative impact. In contrast, the Canadian economy continued to surprise investors with stronger-than-expected trade balance figures.
Friday continued the sequence of bad news as Japanese Average Cash Earnings dropped and Household Spendings declined. The yen kept strengthening versus the greenback, and especially versus high-risk currencies. For instance, USD/JPY plunged below 110.00 for the first time in six months. GBP/JPY was also diving deep below 143.00 support after the UK announced GDP result in April, which failed to confirm sustainable economic growth. Sterling traders went into the put-trading mode despite positive components of the report such as industrial and manufacturing production. The US dollar also had extended losses across the board after weak Consumer Price Index, which missed the Fed’s projections. Most of the stock indices were sold-off with the only exception of the S&P 500 benchmark, which managed to recover some of the previous losses late Friday.