Session Wraps - Major Forex Headlines wrapped up by trading session

GMTAuthor: Adam Button

Forex news for North American trade on December 10, 2018:

Markets:

  • Gold down $4 to $1244
  • WTI crude down $1.75 to $50.86
  • US 10-year yields flat at 2.84%
  • S&P 500 up 4 points to 2637
  • CHF leads, GBP lags

It was another wild one.

The story of the day came in European trading as reports began to circulate that Theresa May would announce a delay to tomorrow's scheduled Brexit vote. That sent GBP lower and then when she confirmed it and everyone piled on, the pound fell even lower. It was down nearly 200 pips at the lows and at the worst since April at 1.2507. It has bounced to 1.2560 but it doesn't look like anything more than a standard bounce on better risk appetite so far.

Speaking of risk appetite, the S&P 500 made major waves once again. It broke below the October low and 2600 shortly after the open and continued to sink to 2583. However it turned around from there as tech turned, in part due to differing views on Apple patents, and the stock market finished 2% up from the lows.

Interestingly, USD/JPY held a bid in both the risk-on and risk-off modes within the day. It added up to a 100 pip gain from the Asian low at 112.25 with the pair finishing at the highs of the day at 113.28.

EUR/USD was sucked lower as GBP fell. It had been holding above 1.14 until cable broke below 1.2600. The breakdown led to a broad USD rally and pulled EUR/USD to 1.1354.

Commodity currencies were also underperformers. USD/CAD has recovered the entire move after Canada's blockbuster jobs report and finished up 75 pips to 1.3397 despite a big narrowing in oil differentials.


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GMTAuthor: Justin Low

2

Forex news from the European morning session - 10 December 2018



Headlines:

Markets:

  • NZD leads, GBP lags on the day
  • European equities lower but off the lows; E-minis down 0.3%
  • US 10-year yields up 0.7 bps to 2.852%
  • Gold down 0.14% to $1,246.64
  • WTI down 1.58% to $51.78
  • Bitcoin up 2.32% to $3,467


Brexit, Brexit, Brexit. The soap opera in markets that just keeps on giving. The pound was the main highlight in the European morning as cable rocked to a high of 1.2760 from 1.2720 after the official ECJ ruling on Article 50 was announced, before it came crashing down to 1½-year lows of 1.2638 as Theresa May pulls tomorrow's Brexit vote.

The move higher after the ECJ ruling was short-lived as it was very much expected but still generated some algo reactions as cable moved up from 1.2720 to 1.2760 before falling back to 1.2730 in quick succession.

There wasn't much else going on in the session thereafter up until reports emerged that May has called for an emergency Cabinet meeting and then sources said that she would be pulling the vote on her Brexit deal tomorrow. Cable fell to 1.2700 when the emergency meeting was called and barely reacted initially to the vote being pulled.

But as the European Commission said that they would not renegotiate any changes to the Brexit agreement, the pound fell to 1.2660 and further worries saw it fall to a low of 1.2638 before recovering slightly to 1.2660 levels currently.

In other events, the dollar remains on the back foot for the most part following Friday's weaker-than-expected jobs report. That saw EUR/USD hold gains between 1.1405-35 for the most part in the session with other major currencies also gaining against the greenback.

USD/JPY was a decent mover on the day as well as the pair fell to a low of 112.24 during Asian trading as risk sentiment soured with E-minis falling by almost 1.0%, but as they recovered to only be about 0.3% lower now, yen pairs also managed to pull higher with USD/JPY now at 112.60 levels ahead of US trading.

Aside from that, oil remains pressured on the day falling by more than 1% to be just under $52 currently. This comes despite the fact that OPEC+ agreed to production cuts on Friday but markets appear to be skeptical on how much that would help to reduce the oversupply issue at hand. The key level to watch out for remains the $50 handle, so technically there isn't a significant move lower just yet.

Expect focus on risk sentiment to remain a key theme in trading later but also look out for more Brexit headlines as Theresa May is due to make a statement in parliament later.


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Forex and Bitcoin news for Asia trading Monday 10 December 2018

EUR, AUD, GBP all opened a little lower in early trade as NZ kicked off the week. A key factor was the weakness in the Chinese November trade data released over the weekend, against a background of less favour for risk generally. When Globex opened US stock index futures were sold also. Yen was a beneficiary of flows, USD/JPY slid under 112.50 and over following hours extended to under 112.30 before showing some support.

As morning trade in Asia progressed the gaps lower in EUR, AUD, GBP against the USD all retraced fully and then currencies added gains quickly. US yield moves, and also a report from Goldman Sachs dialling back their expectations for Federal Reserve rate hikes in 2019 contributed. US equity futures have not shown much recovery (as I post) though. Regional share markets here are also lower.



AUD/USD was helped higher by better housing finance data also. Only one month's data, sure, but the positives came as a bit of a surprise and will cast doubt on the weak story being told (other indicators are not nearly so positive). We now enter the seasonally quiet construction sector period into and over Christmas/New Year in Australia, further housing market data will be patchy during this. 

NZD/USD had a good gain here also. GBP remains volatile ahead of the vote in parliament due Tuesday. The usual 'PM May at risk' headlines were out over the weekend. Perhaps the anti-May folks who have been noisily and wrongly predicting her downfall for the past two years or so may finally get something right?

We got final Japanese GDP data for Q3 of 2018. Ordinarily this wouldn't get much of a mention in the wrap, but the final results were much, much worse than the preliminary.

Still to come:


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Forex news for NY trading on December 7, 2018.

In other markets:

  • Spot gold is up $10.28 or 0.83% at $1248.03
  • WTI crude oil futures are up $.82 or 1.61% at $52.32
  • Bitcoin on Coinbase tried to rally in the last few hours moving from a low of $3212 to $3550 but reversed back to $3338 
In the US stock market, the major indices got trashed once again.  European markets ended mostly higher but at the lows for the day.   

For the week, below is a look at the percentage changes of the major indices. The Shanghai composite and the Austalia S&P/ASX were the only indices that eked out gains. 


In the US debt market today, the yields moves lower with the yield curve inching up 0.4 bps (for 2-10). In this weeks trading the 2-5 spread inverted.


In the 10 year note sector today, yields were mixed with the more "safe countries" (i.e. Germany, UK (if you believe that) and France) yields moving higher marginally. The more risky countries had their yields move lower.


Today, was employment day. The US and Canada both released their reports. For Canada, the numbers were much stronger than expected.   Employment change rose 94K vs 10K expected. The US numbers were lower than expectations. The NFP rose by 155K vs 198K expected. The prior months were revised a little lower.  Wages, although lower MoM, came in as expected YoY.   

What can be said about the report is the jobs market in the US is still positive and growing. That growth is at a slower rates (you expect that at full employment), but at 3.7% for the unemployment rate, you cannot really complain too much.

What the market did not really like is the trade anxiety in the US. WH Economic advisor Larry Kudlow spoke about the positives of the China/US relations, and then WH Trade advisor Peter Navarro did an interview where he raised the saber rattling about increasing tariffs to 25% if no trade deal with China was reached.  Stocks did not like that, and they tumbled into the close.  

Interestingly enough, after the stock close,  Navarro came back on the CNBC and spoke a little softer, a little more kinder about prospects (sent out by The Boss  - Navarro always calls him President Donald "T". Trump - who is reportedly glued to the stock market for the wrong reasons these days?).  The problem is the markets are already closed and most traders have shut off the TV and the screens. Also, do we really know what the relationship really is between Pres. Trump and China's Xi?  I am not sure. The market is not sure either.   The rhetoric about a historic deal is increasingly falling on deaf ears - at least for now.   That is clear from the price action. 


In the forex market, the CAD is ending the session as the strongest (see chart above).  The Canadian employment report was too strong, and the currency was hit lower this week making it easy for the longs in the pair to bail out (buy CAD).    

The AUD was the weakest.  If there is trade concerns, the AUD will not be a beneficiary. It wasn't

The USD ended the day mixed with gains vs the GBP, AUD and NZD and declines vs. the EUR, CAD, and CHF. The USDJPY ended near unchanged levels for the day.

For the week, the CHF was the strongest.  With the stocks down, the CHF can attract safe haven flows and it seems that was indeed the case. The weakest was the AUD for the trade concerns cited above.

Next week the Brexit vote is the BIG event.  The ECB has a rate decision (QE is to end at the end of the year).  What do EU yields do after it is over? It is hard to ignore the stock market. The Fed decision is on December 18th.  The 90-day clock is ticking with China.  

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