FX market outlook

FX market outlook

Yen and gold softer; aussie fluctuates after RBA.

The yen and gold held losses as risk appetite picked up due to easing concerns over North Korea, which helped offset soft data from China today. US President Donald Trump said on Monday that he would be willing to meet with North Korea’s leader Kim Jong Un. Meanwhile, a tentative deal by the US Congress to avert a government shutdown eliminated another concern for the markets.

Data out of China today showed softer-than-expected factory activity in the world’s second largest economy. The Caixin manufacturing PMI missed forecasts and fell to a 7-month low of 50.3 in April versus 51.2 expected.

During today’s Asian session, the Reserve Bank of Australia kept its benchmark interest rate unchanged at a record low 1.5%. The aussie rose after the RBA statement which was slightly more upbeat from the previous one, especially with regards to the global growth outlook.  AUD / USD rose to a session high of $0.7555 before easing back down.

The greenback rose back above the 112-yen level today, reaching its highest level in a month against the yen. The dollar was lifted by a surge in US Treasury yields which were boosted by comments from US Treasury Secretary Steven Mnuchin. In an interview during the Milken Conference on Monday, Mnuchin mentioned the possibility of the US government issuing ultra-long-term bonds.

The euro moved back above the $1.0900 level but since last week it has been little changed and consolidating around this level. A big risk event for the euro would be the French elections on Sunday. But ahead of this, today’s Eurozone manufacturing PMI data will be the market’s main focus.

In commodities, oil traded near a one-month low. WTI crude hovered around $48.70 a barrel. Gold consolidated Monday’s losses to trade around $1256 an ounce.