Monday was a black day for equities investors. Most of the market players were expecting weekend headlines from the U.S. and morning statements from the Chinese officials in the scope of reaction to Trump’s tariff pressure. Some of the optimists were hoping for a quick resolution as they though China will try to arrange the trade deal as soon as possible to protect their exporters. However, that did not happen. Sino government’s reaction was aggressive, stating that it’s impossible to implement any agreements, adding pressure instead of sincerity. Trade war tensions were escalated, and global investors had nothing to do but buy put options for stocks and other high-yield assets. For example, the S&P 500 benchmark lost more than 2.5% of its value in one single day on Monday. Currency speculators reacted by strong flows in safe-haven currencies such as Swiss Franc and Japanese yen while emerging markets were trading in a total put-mode. The gold price jumped above $1300 per ounce, while traders were buying call options for U.S. 10-year Treasury bonds. Overall nervousness and sort of panic were dominating in the binary options market last Monday. Several FOMC voting members were trying to calm markets down, but investors did not really hear them.
Tuesday brought terrible news for Japan’s economy as financial conditions worsened. Adjusted current account declined by 0.5 trillion yen compared to expert’s predictions, bank lending remained almost flat but revised down for March release, and Economy Watchers Current index dropped. As a result, the Japanese yen kept strengthening versus the greenback as traders bought put options for USD/JPY, which tested 109.00 support for the second time this year. Australian NAB Business Confidence Index failed to meet the market’s expectations, starting a whole series of adverse reports for the Aussie. AUD/USD was sliding below 0.7000 support. German and Spanish Inflation figures came in entirely flat versus the economists’ forecasts, but the single European currency kept losing the momentum, falling five days in a row versus the U.S. dollar. The British Pound accelerated the bearish price action after the employment report as the Average Earnings Index dropped, Claimant Count Change came in the red and Employment Change 3M/3M missed more than 50K jobs in April. Sterling traders also kept buying call options for the currency versus Swiss Franc, Japanese Yen and Canadian dollar after the bipartisan political agreement appeared in danger to break down, and Premier Minister Theresa May tried to trigger Article 50 and announce fourth Brexit vote in the Parliament. Non-deal Brexit scenario is on the table, and GBP/USD might suffer from further losses in the weak ahead as the demand for put options is high across the board. The pair dropped to 1.2720 last week for the first time this year, eliminating all of the previous gains over the previous 5 months. German and EU ZEW economic index disappointed Euro investors as well. Export and Import Prices fell in the United States, but the greenback was strong enough even without that report.
Australian reports continued disappointing investors and traders as Westpac Consumer Sentiment, and the Wage Price Index dropped in the first quarter. The Reserve Bank of Australia will have no choice rather than to cut the interest rates in June, easing the financial conditions. Traders kept buying put options for Aussie versus the Japanese yen, U.S. dollar and Euro. The Chinese economy reported soft data for April. Industrial Production, Fixed Asset Investments, Industrial Production and unemployment rate - all figures worsened, adding selling pressure on the Chinese yuan. USD/CNH surged more than 3.1% in the two-week rally, nearing the all-time high mark of 7.0000 for the third time in history. German GDP fell in the first quarter, while the Eurozone GDP remained flat. French Inflation picked up the growth momentum in April, but the E.U. unemployment rate increased, and binary options traders stayed in the putting mode for EUR/USD. U.S. Retail Sales entered the negative territory in April, adding pressure on equities, while the greenback kept strengthening as the world’s reserve currency. Canadian Inflation missed economists’ forecasts, and the Loonie did not continue the bullish rally, while USD/CAD edged higher to 1.3500 resistance for the fourth time this month. Industrial and Manufacturing production declined in the United States.
Employment change and participation rate improved in Australia in April, but that did not support falling Aussie as the AUD/USD currency pair slipped below 0.6900 support early Thursday. While the European economic calendar did not bring anything new in the fundamental environment, the U.S. data was stronger-than-expected. The Housing Sector grew, new job openings improved, and the Philadelphia Fed Manufacturing Index rose in April. That positive surprise fuelled buying of call options for equities and the greenback. Canadian data was mainly mixed, but USD/CAD kept hovering around 1.3500 resistance, while GBP/CAD and AUD/CAD fell sharply. Traders were buying call options for WTI Crude Oil after U.S. inventories report, but the rally was limited around $63.60 per barrel. The black gold price appreciated last week, but gains were limited.
Friday’s economic events were adverse for the New Zealand dollar as traders bought put options for NZD/USD after Business PMI and PPI data reported a decline in Purchase Managers’ activity and ease in inflationary pressure. Most probably, the Reserve Bank of New Zealand will continue softening the monetary policy this year. European consumer price index did not add any changes in the fundamental field for EUR/USD, and the pair kept sliding below 1.1200 support. If the next week’s data was soft, we could see the p[air testing 1.1000 handle. U.S. Michigan Consumer Expectations, Current Conditions and ISM Manufacturing index significantly improved in April, causing another round of heavy-volume demand for the U.S. dollar and stock indices, which rebounded from mid-week lows, recovering most of the previous losses.