(Corrects EU election date in first par to next week (not this
weekend)
* Aussie at fresh 5-month low ahead of weekend vote
* Euro up as U.S. pushes auto tariffs back six months
* Upcoming EU elections hangs over market
* Tensions high as U.S. turns screw on China's Huawei
* Aussie dollar hurt as market prices in rate cut
* Swedish crown hit as risk sentiment dips
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Abhinav Ramnarayan
LONDON, May 16 (Reuters) - The euro edged higher against the
dollar and sterling on Thursday as the threat of U.S. tariffs on
autos was pushed back, though the rise was capped by unease over
next week's European parliamentary elections.
The single currency was up 0.1% at $1.1209 EUR=EBS and up
0.2% against sterling at 87.41 pence EURGBP=D3 , adding to late
gains in the previous session after U.S. officials said
President Donald Trump was expected to delay implementing
tariffs on cars and parts by up to six months. "The news had a limited impact - the stock market reacted a
little bit more - but we think the euro will be much more about
domestic politics now," said Credit Agricole FX strategist
Manuel Olivieri.
"The risk is that we get more populist comments, such as
from the Italian Deputy PM (Matteo Salvini). Italy remains one
of the factors keeping euro downside risks high."
Salvini said on Wednesday that EU budget rules were
"starving the continent" and must be changed, a day after saying
Italy should be ready to break them. News on auto tariffs also provided some support for the
Japanese yen JPY= , which was up 0.1 percent against the dollar
in early trade, adding to a strong run for the currency.
"The yen is the pick of the bunch this week as well as this
month as bond yields have fallen everywhere," said Societe
Generale's head of FX strategy, Kit Juckes.
German 10-year bond yields DE10YT=RR moved below their
Japanese counterpart JP10YTN=JBTC this month.
AUSSIE WOES
With the United States directing its trade-related ire
mostly at China, currencies more vulnerable to risk sentiment
have taken a hit.
The Australian dollar, heavily exposed to economic shifts in
China, hit a five-month low on Thursday though this also had to
do with bruising domestic economic data.
Australia's unemployment rate rose to its highest in eight
months, cementing views its central bank may be forced to lower
borrowing costs soon to stimulate the economy. The currency dropped to $0.6893 in the Asian session though
it clawed back the losses by mid-morning in Europe and was
trading around flat at $0.6933.
Money markets are wagering a rate cut might come very soon,
with futures showing a 50-50 chance of 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.
In Europe, the Swedish crown SEK=D3 led the losses,
weakening 0.2% to 9.6145 per dollar, not far from the all-time
low of 9.661 it hit a week ago.
"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.
Australia's 10-year bond yield hit an all-time low of
1.639%. AU10YT=RR
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World FX rates in 2019 http://tmsnrt.rs/2egbfVh
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