Forex news from the European morning session - 13 January 2020
Headlines:
- Chinese trade delegation en route to Washington to sign Phase One trade deal - Global Times
- The rates market fully prices in a 25 bps BOE rate cut by September 2020
- UK November visible trade balance -£5.3 billion vs -£11.8 billion expected
- UK November monthly GDP -0.3% vs 0.0% m/m expected
- OPEC's Barkindo: Iraq, Nigeria showing better oil output cuts compliance
- German 2019 budget surplus reportedly in low two-digit billions of euros
Markets:
- CHF leads, GBP lags on the day
- European equities a little lower; E-minis up 0.3%
- US 10-year yields up 2 bps to 1.84%
- Gold down 0.6% to $1,553.18
- WTI flat at $59.03
- Bitcoin up 0.3% to $8,069
The pound was the main mover on the session as markets see increased odds of the BOE cutting rates this year.
The currency was already weaker from weekend news after BOE policymaker Gertjan Vlieghe said he could lean towards a rate cut if the economic situation worsens, a similar view shared by Silvana Tenreryo on Friday.
That saw cable sit around 1.3030 to start the European morning before easing just under the 1.3000 handle ahead of UK November GDP data. The release was worse-than-expected and saw the pound slip further with cable easing to a low of 1.2961.
As things stand, the OIS market has fully priced in a BOE rate cut by the September meeting this year and this will be a key factor in driving price action in the pound as we move towards the 30 January meeting and also over the next few months potentially.
Meanwhile, the overall market remains more steady in general as we look towards the US-China Phase One trade deal signing on 15 January.
Risk trades were in good standing earlier in the day as bond yields crept higher, triggering USD/JPY to move to fresh seven-month highs. The pair breached key resistance around 109.70 to hit a high of 109.92.
At the same time, gold also eased lower by around 1% with price creeping under its 200-hour moving average before recovering some ground late on in the European morning.
European equities are the odd ones out here as they sit in negative territory - UK stocks are up on a weaker pound though. US futures are pointing towards mild gains at the open as the major focus stays on the US-China trade deal signing this week.
