Forex news from the European morning session - 11 July 2019
Headlines:
- ECB minutes show governing council agreed on need to prepare for policy easing
- OPEC sees further oil surplus next year as US shale keeps surging
- BOE's Carney: Material risks of economic disruption remain from no-deal Brexit
- BOE says that risks to global outlook have increased
- European Parliament fixes 16 July for vote on von der Leyen appointment
- China says that there is nothing more to say about call with US trade team
- What are markets pricing in for the Fed now after Powell's testimony yesterday?
Markets:
- GBP leads, USD lags on the day
- European equities mixed; E-minis up 0.2%
- US 10-year yields flat at 2.063%
- Gold up 0.1% to $1,420.32
- WTI up 0.4% to $60.70
- Bitcoin down 1.6% to $11,586
There weren't much notable headlines on the session as markets are still mainly focusing on Fed chair Powell's testimony yesterday and what it could entail for the direction of assets and currencies, with the dollar holding weaker across the board once again.
We'll be hearing from Powell again later today as he testifies before the Senate this time around but I reckon we'll get more of the same dovish stuff we heard yesterday.
All this pretty much reaffirms the view that the Fed will cut rates by 25 bps later this month but it also keeps the door open for them to frame it as an "insurance rate cut" or pursue more aggressive easing policy. That is the main conundrum that markets are trying to sort out in the aftermath of Powell's testimony yesterday.
Most of the moves came about in Asia Pacific trading with EUR/USD holding higher around 1.1265-80 levels while USD/JPY stayed weaker around 107.90-10 for the most part. AUD/USD and NZD/USD did post fresh highs in the European morning rising to 0.6986 and 0.6677 respectively as the dollar held weaker throughout the session.
Meanwhile, cable was a notable mover as it climbed from 1.2540 to a high of 1.2571 before retreating back towards the 200-hour moving average currently.
Looking ahead, markets appear to have "won" in bullying the Fed back into pricing in similar rate cut expectations to before the US jobs report but now we'll have to deal with the bigger question of what comes next.
It took the Fed years to build up interest rates to present levels amid a more robust economy and to think that they would so easily use up part of their ammunition makes little sense, unless they're seeing something in the data that we're all not getting.
I don't want to be the one to say it, but I feel that this is one where politics wins again.
