Forex news from the European trading session - 10 January 2018
Economic data:
- UK NIESR Q4 GDP estimate q/q +0.6% vs +0.5% expected
- US MBA mortgage applications w.e. 5 Jan +8.3% vs +0.7% prior
- UK November visible trade balance -£12.23 bn vs -£10.95 bn expected
- UK November manufacturing production m/m +0.4% vs +0.3% expected
- France November industrial production m/m -0.5% vs -0.5% expected
Central banks/Government:
- Dollar sells off after comments by Chinese officials to consider halting UST purchases
- Chinese officials said to recommend slowing or halting purchases of US Treasuries
- UK warns that EU risks financial crisis if they block Brexit deal
Others:
- Ripple extends fall as crypto declines continue
- Putting the SNB's 2017 expected profit into perspective
- Bitcoin's kimchi premium is no free lunch
Markets:
- JPY leads on the day, USD lags behind
- European equities are mostly down on the day as investors grow nervous
- Gold is up 0.88% to $1,324.03
- WTI crude is up by 0.92% to $63.54
- US 10-year yields is up by 3bps to 2.586%
- Bitcoin is down by 3% to $14,050
The trading session in Europe started off rather uneventful with the JPY leading on the day, extending gains from yesterday's BOJ announcement that they would "taper" bond purchases. Then, we had US 10-year yields and German bund yields breaking higher on the day - but that was mostly the extent of any real market action.
Then, there was news that hit the wires saying that Chinese officials who were reviewing the country's FX reserves have recommended to slow down or to halt purchases of US Treasuries. The initial reaction to was a sharp move in US 10-year yields which saw it hit the day's high of 2.57%, and the USD gained a little on the back of the move in yields - but markets reacted in ordinary fashion moments later and the dollar rout began.
The Japanese yen continues to be the lead gainer on the day on the back of yesterday's BOJ announcement as well as a spike in Japanese government bond yields. The global bond rout spread over to US yesterday, and today it impacted Europe as German 10-year bund yields also jumped up to highs not seen since last August.
The swissie and euro are the two next big gainers on the day after the news from Chinese officials. Markets are looking towards either one of those currencies being favoured in the event that China does move to diversify their FX reserves portfolio away from the US dollar.
Meanwhile, the kiwi continues to be one of the star performers as NZD/USD breaks above 0.7200 and reached highs previously seen last October. The pair has dropped a little as we await US trading, now down to 0.7201 after highs of 0.7230.
The AUD meanwhile was trading range-bound against the dollar as market talk was that there are leveraged funds keeping the AUD/USD range-bound in anticipation of Friday's large option expiry in the pair. But as soon as the news from China broke out, the range was pretty much thrown out the window.
Cable meanwhile had a rather eventful session. Sterling was the weakest currency for the most part today, and it fell below 1.3500 to a low of 1.3482 against the greenback mid-morning in European trading. But then, when the dollar sank, the pair recouped losses for the day and is now slightly higher at 1.3542.
In bond markets, US 10-year yields hit a high of 2.595% on the day following the news from China as US Treasuries were heavily sold when the report broke out. Meanwhile, German bund yields also benefited from the spike in USTs and JGBs, as 10-year yields spiked up to 0.54% after earlier touching October highs in early trading of 0.48%.
