Forex news from the European trading session - 13 November 2018
Headlines:
- UK Cabinet said to expect backstop text to be completed today
- Trump continues trade tirade against Europe
- UK Cabinet could be summoned to sign off on Brexit deal tomorrow
- Brexit agreement is closer now than it was yesterday - UK government source
- UK PM spokesman says small number of outstanding issues remain in Brexit talks
- UK Cabinet said to be told to expect backstop decision this week
- Potential last ditch November Brexit deal in the works?
- OPEC sees demand for its crude declining faster than expected in 2019
- US October NFIB small business optimism index 107.4 vs 108.0 expected
- Germany November ZEW survey current situation 58.2 vs 65.0 expected
- UK September average weekly earnings +3.0% vs +3.0% 3m/y expected
- China October M2 money supply +8.0% vs +8.4% y/y expected
- ECB's Praet: Central bank should look through recent slowdown signs
- UK's Lidington: Possible to have a deal in 24 hours but not definite
- Switzerland October PPI +0.2% vs +0.1% m/m expected
- ECB's Praet: There has been some slowdown in Eurozone economy
- Germany October final CPI +0.2% vs +0.2% m/m prelim
- Italy reportedly will keep 2.4% deficit target for 2019
Markets:
- GBP leads, JPY lags on the day
- European equities mostly higher, E-minis up 0.5%
- US 10-year yields down 2.4 bps to 3.158%
- Gold up 0.20% to $1,202.75
- WTI down 1.40% to $59.05
- Bitcoin down 0.09% to $6,304
It is all about Brexit this session as the pound erased almost all of its overnight losses against the dollar. The session started off with dollar weakness across the board in what was more of a retracement of yesterday's gains by the greenback. That remains the case for the most part among most major currencies barring the pound.
GBP/USD started the session around 1.2870 before climbing to break above 1.2900 as Cabinet secretary David Lidington said a deal may come about over the next 24 hours. Despite a solid labour market report, cable ranged between 1.2880 and 1.2920 thereafter before breaking higher as talks of a breakthrough in negotiations could potentially come about by today; signalling a potential Cabinet meeting tomorrow to sign off on a deal.
That led the pound to rally further with cable rising to 1.2960 and then making its way to a high of 1.2980 before backing off slightly now. The move higher in the pound also dragged the euro higher on the day with EUR/USD quietly rising from 1.1240 to near the highs now at 1.1267.
Meanwhile, the aussie and kiwi remained solid on the session rising on the back of dollar weakness against the Chinese yuan as well as improvement in risk sentiment among equities. AUD/USD ranged between 0.7190 to 0.7210 for the session and trades near the highs now. Likewise for NZD/USD as the pair ranged between 0.6730 to 0.6750 and sits just above the upper range currently.
The other major story in markets is the slump in oil prices. Oil fell overnight after a tweet by Trump complaining about production cuts by Saudi Arabia and OPEC and that led to a sustained decline. At the lows, oil fell by more than 2.5% to close in on a fresh nine-month low but has recovered a little as we head into US trading.
The decline in oil prices is what is failing to give a lift to the loonie today with USD/CAD trading a little lower after having touched a high of 1.3247 earlier in the session and is now trading a little lower at 1.3235.
The session ahead doesn't have much in terms of key data and North American traders will be looking to ease back into things following the long weekend but Brexit headlines are making for a messy time right now. It's all about the ebb and flow and headline trading now so be wary of potential major price reversals that could potentially come after yesterday's action.
