Monday did not promise such significant shifts as the trading volume was quite low, volatility eased, and major assets were hovering around the same levels as in the previous week. One of the reasons for thin market conditions was the holiday in the United Kingdom and the United States, which left many exchanges without traders. The economic calendar was not that hot as well. Japan released Leading Index, and BoJ Kuroda spoke about the monetary policy prospects, while traders did not get too much influence from those events and USD/JPY was hovering above 109.50 mark. The European trading session opened with optimism after EU elections, but Euro’s strength was short-lived, and EUR/USD slid back below 1.1180 in choppy trade. The number of French jobseekers declined slightly in April, adding some structural support for the single European currency. The rest of the price action was quiet.
Swiss GDP jumped in the first quarter of this year, adding support for the Swiss Franc. As a result, USD/CHF edged lower, heading to the parity. German data was disappointing for Euro bulls as import price index and consumer climate dropped in April. EUR/USD accelerated the bearish trade as investors preferred buying put options for the pair. Gross Mortgage Approvals improved in Great Britain in April, but that did not prevent Sterling from further downside action on Tuesday. U.S. Consumer confidence soared in May, beating the market’s consensus. As a result, stock indices rebounded from lowest rates in 5 weeks, while the U.S. dollar’s call options were in demand across the board.
Wednesday was much more active in terms of trading volume and volatility. The day began with the Reserve Bank of New Zealand publishing its Financial Stability Report, which showed that things aren’t that bad in the country’s financial conditions. RBNZ Governor Orr spoke in a press-conference stating that the economic growth is sustainable and the labour market is robust, however, external challenges might hurt the country. Therefore, the regulator is ready to act in the scope of supporting local exporters and producers by softer monetary policy and lower interest rates, even though the New Zealand dollar might get hurt because of those measures. NZD/USD accelerated the bearish action as rates slid to 65 cents, while NZD/JPY weakened even faster, testing the support level of 71.00 yens per one kiwi. French GDP was in line with the expectations, while inflationary pressure eased in the first quarter. German unemployment rate brought a negative surprise to Euro optimists, and EUR/USD plunged below 1.1100 support for the second time this month. On the other side of the Atlantic, traders were expecting the Bank of Canada to announce interest rates decision and publish the economic statement. Loonie bulls did not find any support from the central bank, although recent macroeconomic data was robust in Canada. The main regulator’s concern was related to unknown impact from geopolitical tensions. USD/CAD went off the tight consideration range and closed the trading week above 1.3500 despite greenback’s sell-off on Friday.
Building Approvals and Private New Capital Expenditure dropped in Australia in April, but the Aussie stayed in a tight 45-pips range versus the greenback and fell versus the Japanese yen. The main factor was that investors were waiting for the Reserve Bank of Australia’s meeting next week, and some hawks still hope that the regulator won’t cut the interest rates. Spanish CPI came in softer than economists expected and ECB will have many justifications to soften the monetary policy in the Eurozone next week. Binary options traders were also focusing on U.S. GDP revision for the first quarter of 2019, and the reading came precisely in line with the previous figure. The GDP Prices index was revised down though, easing chances for the Federal Reserve to tighten the monetary policy this year. Good trades balance increased the negative, but initial jobless claims were down this past week. With a mixed bias, the U.S. dollar remained flat throughout the New York trading session on Thursday.
Friday morning (Thursday night by NY time) brought terrible news from White House. Donald Trump decided to push the tariffs button again, and this time Mexico appeared in his geopolitical radar. The country would suffer from protectionist measures like import tariffs for Mexican goods will be imposed starting from June 10, while the percentage would keep increasing by 5% every month. As a result, Mexican Peso dropped 3% versus the greenback, and other emerging markets were sold-off brutally, stock indices plunged, while safe-haven assets call options jumped. WTI Crude and Brent Crude oil prices extended losses after weak inventories report, and the gold price surged above $1305 per ounce. Toky Core CPI failed to meet the market’s expectations, accelerating USD/JPY bearish trade below 109.00 support. China’s Manufacturing PMI was in the red as well. Italian and German CPI was soft, while the Canadian GDP beat the analysts’ predictions. Even strong U.S consumer spending report did not prevent the greenback from further sliding on the back of the risk-off sentiment, while U.S. stock indices extended losses. Global financial markets appeared under a threat of deep turbulence this summer.