Risk-Off Mood Deepens

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USD Softer

The US dollar has had a softer start to the penultimate European session of the week. USD index trades 97.76 last, down slightly from the recent 97.91 highs. Stronger than expected CPI data lifted USD earlier in the week though momentum has stalled as concerns grow regarding the threat of a US recession. This week, the yield in 2Y USTs moved above the yield in 10Y USTs for the first time since 2007. This same event has typically preceded a US recession historically.

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EUR Outlook Clouded By Data Weakness

EURUSD has been a little firmer against USD so far today though remains heavy with price trading 1.1145 last, following the rejection at the 1.1217 level. Data weakness in the eurozone, particularly Germany, has compounded fears over the slowdown, keeping ECB easing expectations elevated.

GBP Boosted By Data Beats

GBPUSD remains bid so far today with price boosted by a further raft of positive UK data. July CPI this week came in stronger than expected on both headline and core readings while retail sales released today also surprised to the upside. GBPUSD trades 1.2009 last, however, as positive data is unable to provide much of a lift in the face of the ongoing Brexit uncertainty clouding the outlook.

Equities Extend Their Decline

Risk assets continue to trade heavily today as the growing fears of a global recession weigh on risk sentiment. Data weakness in Germany as well as worrying developments in US treasury yields, combined with the ongoing US/China trade wars and the uncertainty of Brexit, are sending equities slower into the end of the week. SPX500 trades 2831.53 last with price continuing to rollover following the break back below the 2908.55 level.

JPY & Gold Rally

Safe havens have continued to trade to the upside today with both JPY and gold trading higher against USD in light of the ongoing equities slide. USDJPY trades 105.84 last with price having conceded most of the gains made earlier in the week. XAUUSD is trading back up towards the major 1522.75 level. This is a big long- term level for gold. A violent reaction lower was seen when it was first tested earlier in the week.

Crude Continues Lower

Oil prices have come back under pressure today. Ongoing fears around the escalating US/China trade war, as well as emerging fears about the threat of a possible global recession, are keeping crude weighed. Price trades 54.23 last sitting just above the recent 54 level lows.

CAD Down, AUD Up

USDCAD has been firmly higher again today as weakness in oil prices, as well as growing fears over the health of the global economy, weigh on CAD. USDCAD is trading back above the 1.33 level now, having retest the level as support overnight and looks on course to end the week above the level, keeping the focus on further upside in the near term.

AUDUSD has been a little higher today as price continues to fight it out at the .6758 level. AUD remains under pressure given the volatile nature of the trade situation between the US and China. The RBA recently noted that it foresees further rate cuts as likely. The market is pricing in another cut by November. Currently, though, this could be brought forward given the recent deterioration in global sentiment.

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