ForexLive European FX news wrap: Dollar struggles continue as markets stay on edge

Headlines:

• Dollar selling returns to start European morning trade
• Markets consolidate ahead of Trump’s update on semiconductor tariffs
• The bond market stays on edge in the new week
• What are the interest rates expectations for G8FX?
• China president Xi arrives in Hanoi
• China welcomes partial U.S. tariff rollback but calls it only a ‘small step’
• Trump has directed for tariff talks to begin immediately with South Korea, Japan, India

Markets:

• GBP leads, CHF lags on the day
• European equities higher; S&P 500 futures up 1.6%
• US 10-year yields down 4 bps to 4.456%
• Gold down 0.4% to $3,222.04
• WTI crude up 1.7% to $62.54
• Bitcoin up 1.3% to $84,817

The market is holding on to some hopeful optimism to start the week, with all eyes staying on the US-China trade rhetoric.

Over the weekend, we had Trump come out to confirm that the US will be paring down tariffs on key electronics to 20%. That is while waiting to place all of that in a different tariffs basket, which might take up to a month or longer.

That helped to ease some concerns of further escalation and is helping to keep equities underpinned to start the new week. S&P 500 futures were up around 1% in Asia before pulling a little bit higher in European trading amid some pushing and pulling. European indices are also holding up, posting gains of a little over 2% for the time being.

Despite that, FX traders maintained their conviction in selling the dollar in the new week. EUR/USD nudged up to just above 1.1400 briefly but is still up 0.3% to 1.1390 on the day. Meanwhile, GBP/USD climbed up from 1.3120 to touch 1.3200 during the session as sterling is an outperformer today alongside the antipodes.

USD/JPY fell to a low of 142.25 in Asia before nudging up to 143.00, then falling back again during European morning trade. There is a slight bounce back now to 143.15, though the pair is still down 0.2% on the day.

The Swiss franc is the biggest loser though, with USD/CHF seen up 0.5% to 0.8190 and EUR/CHF up 0.8% to 0.9330. SNB in play perhaps?

Elsewhere, the bond market continues to stay on edge for the most part with 30-year yields in the US holding near 4.87% currently. There’s not much of a let up there and I would take that as a more solid indicator of broader market sentiment for the time being.

It’s all about watching for headline risks again. So, let’s see what Trump has to offer later in the day with Xi out visiting Vietnam and ironing out deals with Southeast Asian countries this week.

This is a market that is still fragile but at the same time, sentiment can quickly change on a flip of a dime.

This article was written by Justin Low at www.forexlive.com.