What are markets saying ahead of European trading?
- China vice premier Liu He says China is willing to resolve trade dispute with US
- PBOC sets USD/ CNY reference rate for today at 7.0570 (vs. Friday at 7.0572)
In the currencies space, we've seen USD/JPY climb back up from a low of 104.46 to 105.80 before falling back to 105.30 currently today.
That comes after the headlines above helped to inject some calmness in markets but how optimistic are traders actually feeling ahead of the European markets open?
Although US equity futures have pared losses from ~1% earlier to around 0.5%% currently, I wouldn't look too much into that. The negative tones still suggest that risk sentiment remains soft at the moment.
When you look over to the bond market, it tells a much clearer picture of how markets are navigating through the start of the week.
US Treasury yields hold near the lows for the day still with 10-year yields seen down by close to 8 bps since the end of last week, now at 1.456%.
Even when you look at yuan levels now, you can tell that there is still fear among market participants. USD/CNY trades at 7.14 while USD/CNH trades at 7.16 currently despite the firmer PBOC fixing in the morning earlier today.
In my view, all of that depicts the actual story in markets right now and that is one of sentiment being skewed towards a more risk-off approach in European trading later.
Sure, the yen and gold may have given up some gains on the day. However, trade tensions are more than likely to continue flaring up in the near future. That suggests that the path of least resistance for haven/safety assets is still for a move higher amid ongoing worries surrounding the global economy in general.