Forex news from the European trading session - 11 October 2018
Headlines:
- European Commission says there is no breakthrough on a Brexit deal just yet
- UK PM spokesman says there are still big issues to be resolved in Brexit negotiations
- Ireland's Coveney says there isn't an agreement on a way forward on Brexit deal yet
- Irish PM Varadkar says that a November Brexit deal may not be possible
- Spain September final CPI +0.2% vs +0.2% m/m prelim
- ECB's Hansson says wouldn't want to be more precise with regards to rates guidance
- France September final CPI -0.2% vs -0.2% m/m prelim
- ECB's Rehn says that core inflation is still rather weak
- RBA's Lowe says that higher US dollar is a welcome development
- PBOC governor says China will be able to achieve 2018 growth target
- Fed's Bullard says that current US economic conditions are quite good
- BOJ's Sakurai: It will take some time to hit 2% price goal
- Italy's Borghi reportedly expects EU to reject government's budget plan
Markets:
- NZD leads, USD lags on the day
- European equities lower, Italy eyeing to move into bear market territory
- US 10-year yields up 1.7 bps to 3.180%
- Gold up 0.69% to $1,203.04
- WTI down 1.68% to $71.95
- Bitcoin down 5.06% to $6,203
The session began with a continued rout in the equities space as Wall Street's selloff overnight goes global. Asian equities were the first to be hammered with Chinese equities making fresh four-and-a-half year lows. The Nikkei also fell heavily and the drop today effectively erases all the gains posted for the year for Japanese stocks.
However, despite the risk aversion seen in equities, currencies were more steady with the aussie and kiwi retracing losses from overnight trading while the euro and pound also holding up well. The laggard in all of this to begin the session was the dollar.
European equities opened lower and traded in the same manner throughout the session but it did little to affect markets in general as all eyes are focused on the US CPI report that is to come later at 1230 GMT. Of note, Treasury yields were calm on the day barely budging and only moved a little higher in the last hour. And that allowed currencies to maintain a similar tone throughout the session.
EUR/USD started the session at around 1.1560 before moving to 1.1540 as Italy's budget worries started to creep in but the pair moved back higher as the dollar remains weak and moved to a high of 1.1582 before settling around 1.1570 currently.
GBP/USD started the session at the highs around 1.3244 before moving lower to touch 1.3182 as softer Brexit rhetoric crossed the wires. But as the dollar stays weak, the pair recovered and now trades back at around 1.3220 levels.
USD/CAD trades lower ahead of US trading and hasn't been moving all too much on the session as the weaker dollar is offset by tumbling oil prices. The pair ranged from 1.3035 to 1.3050 for majority of the session and now settles near 1.3045.
AUD/USD began the session around 0.7070 but then made its way higher to 0.7090 levels as price managed a break of the 100-hour MA. The pair then touched a high of 0.7101 as the dollar softened and trades near the figure handle now ahead of US trading. NZD/USD saw similar action as it started around 0.6470 levels before jumping up to a high of 0.6494 where it trades just below now.
USD/JPY was more subdued after the sharp fall seen in overnight trading. Although US equity futures are lower, the reaction here basically says that markets are waiting for the next key catalyst to hit, which is the US CPI report. The pair traded between 112.15 to 112.30 for the most part in what has been a lackluster session for both the currency pair and Treasury yields.
The focus in the session ahead will be that of the US CPI report. The thing to look out for is any spike in inflation or wages as that will set off further selling seen in US equities and that is likely the kick that is needed to move the yen today.
