Market wrap: China/US negotiations on a bilateral trade deal continue - Westpac

Analysts at Westpac noted that it was a somewhat risk-averse mood that weighed on equities, commodities and treasury yields in Friday NY trade but noted that the

Key Quotes:

"Major currency moves were mostly modest."

"On Sunday, Treasury Secretary Mnuchin said of China talks that, “we’re putting the trade war on hold.” Threatened sweeping tariffs on Chinese goods would not be imposed, as negotiations on a bilateral trade deal continued.

This positive news saw risk barometer AUD/JPY rise from 83.20 to 83.55 at this morning’s open, a rather small reaction which implies underlying wariness, though we will see if Asian markets are more confident. AUD/USD spent some time Friday testing 0.7490 but starts the week around 0.7525.

EUR/USD fell from 1.1820 to 1.1750 – a five-month low – but steadied down only 0.2% over the day. Friday saw the finalising of the Italian coalition agreement, which is being voted upon by party members before being presented to President Mattarella on Monday. GBP/USD edged down 0.3% to 1.3470.

USD/JPY slipped from 111.00 to lows around 110.60 as US treasury yields fell amid jittery early NY trade. The pair popped up to 111.00 early Sydney trade Monday, the safe haven yen slipping on the US-China trade news. Outperformer NZD rose steadily over Friday, from 0.6880 to 0.6920. AUD/NZD starts the week down about 0.4% over the day.

The Canadian dollar was the weakest G10 currency on Friday as Canadian Mar retail sales printed -0.2% m/m, a long way short of consensus of +0.5%, after a flat Feb. Canada CPI met expectations, up 0.3% m/m, 2.2% y/y. USD/CAD bounced from 1.2800 to highs above 1.2900.

The US 10yr treasury yield fell on Friday from 3.12% (highest since 2011) to 3.06%, quite a large move without any inspiration from US data. 2yr yields fell from 2.57% to 2.55%. Fed fund futures yields continued to predict a rate hike in June, plus at least another by year end. In Italy, 10yr government bond yields rose 11bp to 2.23% - the highest since July 2017 – amid coalition formation."