Forex news from the European morning session - 11 January 2019
Headlines:
- ECB's Nowotny: Can still imagine a rate hike this year
- European official says EU-UK contact to aid Brexit deal is at 'all levels'
- ECB's Nowotny: Germany likely to have very low growth rate in Q4 2018
- Pound goes for a see-saw ride as Brexit delay talks sends the quid up and down
- UK November GDP +0.2% vs +0.1% m/m expected
- Bercow's Brexit ruling - Why the tail may wag the dog
- China said to set a lower GDP growth target of 6% to 6.5% in 2019
- Japan says will revise GDP wage component figures due to flawed labour market data
Markets:
- NZD leads, USD lags on the day
- European equities mixed, mostly lower; E-minis down 0.2%
- US 10-year yields down 3.3 bps to 2.709%
- Gold up 0.5% to $1,293.39
- WTI up 0.5% to $52.84
- Bitcoin up 0.1% to $3,635
The highlight of the session was the pound swinging back and forth and back again on headlines that Brexit may be delayed beyond 29 March. Cable sank to lows of 1.2710 early on before recovering to 1.2760 and then got a shot in the arm towards 1.2851 after a report by the Evening Standard said that Cabinet ministers are seeing a delay in Article 50 as "increasingly likely".
But the government was quick to play down the rumours and said that May has insisted that any extension of Article 50 has been ruled out. That saw cable slip to 1.2770 before recovering back again to 1.2820 now as the dollar remains weak on the day.
As mentioned earlier, despite what May says now, if she loses the vote next week, an extension of Brexit is just about the best option she could go for regardless of whatever stance she is taking now.
The greenback got no help from dovish Fed officials overnight and started the session lower and never really recovered throughout. The biggest beneficiaries have been risk currencies with the aussie and kiwi leading the charge higher. Both currencies were also helped by a move higher in the Chinese yuan despite mention of China possibly cutting its growth target for this year.
AUD/USD and NZD/USD are trading at session highs now as both pairs look to secure a break above the 100-day MA and the 200-day MA respectively. The former steadily moved higher from 0.7210 to 0.7230 now while the latter moved from 0.6820 to 0.6840 levels currently during the session.
EUR/USD maintained a narrow range between 1.1520-40 as buyers continue to hold a break above the 1.1500 level. Meanwhile, with US equity futures looking muted, USD/JPY traded in a narrow range of 108.20-40 as well.
Looking ahead, markets will be heavily focused on the US CPI release to come later on as that traders will seek clues on whether or not the data will reaffirm the Fed's dovishness and confirm the dollar weakness seen as we look to wrap up the week. Stocks will also be looking towards the data release for further direction.
