FOREX-More woe for Aussie dollar as market bets swell on RBA rate cut

* Aussie at fresh 5-month low ahead of weekend vote
* Market prices in 90% chance of July RBA rate cut
* Swedish crown hit, euro flat as risk sentiment dives
* Tensions high as U.S. turns screw on China's Huawei
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Abhinav Ramnarayan
LONDON, May 16 (Reuters) - The Australian dollar hit a fresh
five-month low on Thursday as investors came close to fully
pricing in a rate cut for July on bruising domestic economic
data and a swelling trade conflict between the United States and
China.
In Europe, the Swedish crown led losses while optimism on
the euro proved short-lived with trade tensions and upcoming
European elections weighing on sentiment.
But it was the Aussie dollar AUD=D3 that was firmly in
focus after Australian unemployment rose to its highest in eight
months, cementing views its central bank may be forced to lower
rates soon to stimulate the economy. The currency was down a quarter of a percent at $0.6933 in
early European trade, having hit a new five-month low of $0.6893
in the Asian session.
"The Aussie has remained under pressure with labour and
unemployment data being what it is, while RBA rate cut
expectations have increased," said Manuel Olivieri, an FX
strategist at Credit Agricole.
"It will likely remain defensive with elections coming up
this weekend, not to mention it is quite sensitive to risk
sentiment," he added.
Money markets are wagering a rate cut might come very soon,
with futures now showing a 50-50 chance for a quarter-point
easing in June 0#YIB: . A move to 1.25% was put at a 90%
probability for July and was more than fully priced by August.
Australians have a choice between tax cuts and greater
public spending when they vote in a general election on
Saturday, the starkest distinction in economic policy in years
from the two main political parties. Australia's 10-year bond yield hit an all-time low of 1.639
percent. AU10YT=RR
The currency has also been hit in recent weeks by Sino-U.S.
trade tensions - given Australia's strong trade links with China
- and news on that front was alarming on Thursday after Chinese
telecoms giant Huawei was hit with severe sanctions by the
world's largest economy. These trade tensions also hit European currencies, with the
Swedish crown SEK=D3 weakening 0.2 percent at 9.6145 per
dollar, not far from an all-time low of 9.661 per dollar hit a
week ago.
The euro meanwhile was flat to a touch higher on the day at
$1.12045, following some gains the previous session after U.S.
officials said President Donald Trump was expected to delay
implementing tariffs on imported cars and parts by up to six
months. The loss of momentum in the single currency is likely down
to worries around an upcoming European parliamentary election,
in which anti-establishment parties may make significant gains.
"We think the euro will be much more about the domestic
politics now and the risk that we get more populist comments,
such as from the Italian Deputy PM," said Olivieri of Credit
Agricole.
Italian Deputy Prime Minister Matteo Salvini said on
Wednesday European Union budget regulations are "starving the
continent" and must be changed, a day after he roiled financial
markets by saying Italy should be ready to break the rules.
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World FX rates in 2019 http://tmsnrt.rs/2egbfVh
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