ForexLive European FX news wrap: Pound climbs on hope for more expansive budget; risk-off continues

Author: Justin Low | Category: News

Forex news from the European morning session - 13 February 2020

Headlines:

Markets:

  • GBP leads, NZD lags on the day
  • European equities lower; E-minis down 0.7%
  • US 10-year yields down 4 bps to 1.593%
  • Gold up 0.6% to $1,574.70
  • WTI down 0.6% to $50.85
  • Bitcoin down 1.8% to $10,199

EOD 13-02
Things began with a heavy focus on risk as coronavirus headlines stirred the pot, after China reported a huge jump in reported cases - owing to a reclassification in Hubei cases.

Risk trades were softer as a result of the risk-off mood in the market, and that only intensified during the session as stocks fell while bonds were strongly bid amid safety flows.

USD/JPY inched lower from 109.85 to 109.62 as the yen stayed bid with Treasury yields falling quite a bit across the curve. At the lows, 10-year yields were down by more than 6 bps to 1.566% earlier in the session.

Meanwhile, the aussie and kiwi are modestly softer as both currencies retrace some of their earlier gains from this week but nothing too substantial for now.

As we moved towards European midday, the UK cabinet reshuffle took a twist as Sajid Javid announced his resignation. The pound was already trading mildly higher against the dollar, around 1.2985 before the news took it lower to 1.2965 initially.

But as the details surfaced, it was No. 10 who forced Javid's hand as they wanted him to fire his advisers - just a month before the budget announcement in March.

Thereafter, the pound gained strongly and broke 1.3000 as the market sees the move as being one that Johnson is preparing to unleash a host of fiscal measures next month.

In essence, this also reduces the need for the BOE to act so soon if there will be fiscal help to bolster the UK economy in the short-term.

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