Euro slides to 19-year lows.
There was a further strong focus on natural gas prices during Tuesday with a fresh surge in prices to a 16-week high undermining confidence in the Euro-Zone outlook. There were particular concerns over the German economy given its dependence on imported gas and increased economic vulnerability.
In this context, there were fresh doubts whether the ECB would be able to tighten monetary policy significantly.
Fears over the Euro-Zone outlook triggered sharp Euro selling, especially with a further slide in risk appetite. A break in EUR/USD below the important 1.0350 level helped trigger further aggressive Euro selling and EUR/USD slumped to 19-year lows below 1.0250 with only a marginal recovery.
Confidence in the US and global economies also deteriorated during the day amid fears that there would be a slide into recession as monetary tightening and the surge in energy prices take effect.
In this environment, risk appetite deteriorated and there were renewed losses in global equities, although Wall Street did manage to recover and post slight gains at the close.
US Treasuries posted strong gains on Tuesday as bonds drew support from the slide in confidence in the US economic outlook with defensive demand amid weaker risk appetite also a key element.
The 10-year yield dipped sharply to 5-week lows around 2.80% before stabilising.
Oil prices declined sharply as fears over the global economy intensified with expectations that recession in the global economy would undermine demand for crude.
WTI declined sharply to 2-month lows below $98.0 p/b before a tentative recovery.
UK political drama intensified on Tuesday following the resignations of Chancellor Sunak and Health Secretary Javid. Political chaos added to the underlying lack of confidence in Sterling even though the wider slide in risk appetite was a key element triggering a GBP/USD slide to fresh 2-year lows.
Overall currency-market volatility increased during the day. There were reports of a larger Euro sell order in early Europe which undermined confidence in the single currency. There were fresh doubts over the ability of the ECB to tighten policy significantly which undermined the Euro. EUR/USD slumped to 19-year lows below 1.0250 with only a marginal recovery.
The yen gained defensive support as equities moved sharply lower. USD/JPY dipped to lows near 135.00 with only a marginal recovery. The dip in global risk appetite also underpinned the Swiss franc. EUR/CHF dipped to 7-year lows around 0.9925 with net USD/CHF gains to 0.9685.
Sterling was undermined primarily by vulnerable risk conditions. Political developments also hampered confidence in the UK currency. GBP/USD hit fresh 2-year lows at 1.1900 with only a slight recovery. EUR/GBP dipped from highs near 1.1700 to trade around 1.1640.
Weaker risk appetite triggered sharp losses for commodity currencies. AUD/USD hit 2-year lows near 0.6760 before a slight recovery to 0.6790. USD/CAD surged to 20-month highs at 1.3080 as weaker oil prices also undermined the Canadian currency before settling around 1.3040.
|07:00||German Factory Orders (M/M)(MAY)||-2.70%|
|08:30||EUR Markit Germany Construction PMI (JUN)||45.4|
|09:30||GBP PMI Construction(JUN)||56.4|
|10:00||Euro - Zone Retail Sales (Y/Y)(JUN)||3.90%|
|10:00||Euro - Zone Retail Sales (M/M)(JUN)||-1.30%|
|14:45||USD Markit PMI Composite(JUN 08)||51.2|
|14:45||USD Markit Services PMI(JUL)||51.6|
|15:00||USD ISM Non-Manufacturing PMI(JUN)||56.4||55.9|
|15:00||USD JOLTs Job Openings(MAY)||11.400M|