Forex news from the European morning session - 12 December 2018
Headlines:
- Italy PM office said to not confirm 2.0% deficit target
- Italy is said to propose 2.0% deficit target to the EU
- 153 Tory lawmakers are said to be publicly backing May so far ahead of confidence vote
- UK PM May says general election at this point in time would not be in national interest
- US MBA mortgage applications w.e. 7 December +1.6% vs +2.0% prior
- Italian government said to have agreed on new fiscal targets to submit to the EU
- EU reportedly unlikely to assure UK on backstop before Christmas
- Eurozone October industrial production +0.2% vs +0.1% m/m expected
- The importance of a good foundation. A lesson from Dubai's Palm
- Theresa May: I will contest the vote with everything I've got
- UK's Gauke says if May loses, new PM will have to delay Article 50
- Graham Brady says threshold was reached on Tuesday
- Leadership contest against Theresa May has been triggered
- China says 'nothing to share' on detention of former Canadian diplomat
Markets:
- GBP leads, NZD lags on the day
- European equities higher; E-minis up by 0.9%
- US 10-year yields up 1.3 bps to 2.892%
- Gold up 0.10% to $1,244.49
- WTI up 2.15% to $52.76
- Bitcoin up 1.02% to $3,408
The focus of markets today is on Westminster as a leadership contest against Theresa May was triggered just before markets opened. That sent the pound to lows for the day with cable dipping from 1.2510 to 1.2478. However, immediately after the announcement was made official, public support for Theresa May began to grow and that saw cable move up to 1.2550 before settling around 1.2520 mid-way through the session.
May then came out to speak and said that she will "contest the vote with everything I've got" and the confident facade along with more public backing saw the pound move higher to 1.2550 levels in GBP/USD. And as more and more Tory lawmakers poured their support for her, with BBC reporting that the 158 votes needed was matched, the pound jumped higher with cable ending the session now at the highs just under 1.2600.
However, do be reminded that the confidence vote later will be a secret ballot - whereby votes are anonymous - so there is some caution to be heeded ahead of key event in trading later in the day. The vote is set to begin at 1800 GMT and is set to go through to 2000 GMT with the result likely to be announced around 2100 GMT.
Aside from that, Italy stole the spotlight temporarily towards the end with Bloomberg reporting that the government is set to propose a 2.0% budget deficit to the European Commission. EUR/USD was ranging between 1.1320-30 levels for the day before jumping up to a high of 1.1364 before the report got denied and the pair is now trading near 1.1340.
Risk sentiment remains buoyant with US equity futures underpinned as E-minis are up by 0.9% currently ahead of the US November CPI data release. That will be a key focus for equities in the session ahead as it would also impact sentiment ahead of the FOMC meeting next week.
Elsewhere, other major currencies traded tepidly on the day with all the attention being focused on the UK and Theresa May. However, the kiwi is earning the title of the worst performing major currency after NZD/USD failed to breach the 0.6900 and is now trading at the lows near 0.6845 with sellers threatening to breach the 200-day MA as mentioned here.
Looking ahead, the immediate focus will be on the US November CPI data before attention will then turn towards the Tory leadership vote at the end of the trading day.
