Forex news from the European morning session - 1 November 2018
Headlines:
- EU says cannot confirm when next meeting between Barnier and Raab will take place
- EU's Weyand reportedly casts doubt on hopes of a Brexit deal being reached within three weeks
- Xi Jinping: China's economy facing increasing uncertainties and downward pressure
- UK October manufacturing PMI 51.1 vs 53.0 expected
- Britain's Brexit ministry: Negotiations ongoing; nothing agreed until everything is agreed
- Trump: Looks like we're going to win the Senate
- Switzerland October manufacturing PMI 57.4 vs 58.7 expected
- Switzerland October CPI +0.2% vs +0.1% m/m expected
- Brexit: Financial services deal may be expected if overall deal is agreed this month
- Bank of England's November deal to be overshadowed by Brexit
- UK October Nationwide house price index 0.0% vs +0.2% m/m expected
- Switzerland October SECO consumer confidence -6 vs -7 expected
- Italy's Conte: Blaming current government for weak economic data is unreasonable
- Here's a key reason that's driving aussie, kiwi gains today
Markets:
- NZD leads, USD and JPY lags behind on the day
- European equities trade higher, E-minis up 0.4%
- US 10-year yields up 1.3 bps to 3.157%
- Gold up 0.72% to $1,223.50
- WTI down 0.67% to $64.87
- Bitcoin up 0.10% to $6,309
The session started off with profound dollar and yen weakness across the board and it pretty much moved forward in the same manner as wrap up the European morning now. The yen remains weak on the back of improved sentiment in equities as Wall Street booked two straight consecutive higher closes for the first time since 19-20 September (or at least for the S&P 500). Asian equities moved higher for the most part and that is helped by sentiment in E-minis as well.
But the big story of the day has been the unrelenting squeeze in the US dollar. It all started in Asian trading as the pound moved higher on hopes of a Brexit deal and the aussie jumped after better-than-expected trade balance data, dragging the kiwi higher alongside it. And that led to solid gains across the board as GBP/USD started the session around 1.2850 and AUD/USD started around 0.7130 with NZD/USD around 0.6580.
Those gains in itself already hinted that there was more to this than just positive headlines as the dollar also holds weaker across the board. This is more of a story of a short squeeze seen in those three currencies - particularly aussie and kiwi (and the yuan) - and that's leading to the broader dollar weakness seen here.
As the session moved along, GBP/USD extended its gains to 1.2920 before dipping back to 1.2900 before a quick dip towards 1.2940 as a UK official labelled reports of a financial services deal as 'unsubstantial'. But given how positioning squeezes tend to ignore fundamentals, the pound stayed true to form and recovered to 1.2890 seen now against the dollar.
AUD/USD moved higher throughout the session and reached a high of 0.7165 and trades close to it now. NZD/USD saw similar price action moving to a high of 0.6616 and trades above the 0.6600 currently ahead of US trading.
Other currencies didn't do all too much but in general gained against the dollar and the yen with EUR/USD steadily climbing from 1.1340 to the highs seen now approaching 1.1400. USD/CHF saw a similar move downwards falling from 1.0050 to a low of 1.0026 seen at the moment.
It's all about the dollar squeeze so far today and that will be dominant theme to trade around when US traders enter the fray later on in the day.
