Forex news from the European morning session - 14 November 2018
Headlines:
- Ireland's Varadkar: If backstop is invoked, it must apply until a wider agreement replaces it
- Ireland's Varadkar: There may be a Brexit summit before the end of the month
- UK PM May: Cabinet will decide on next steps in the national interest of Brexit
- US MBA mortgage applications w.e. 9 November -3.2% vs -0.7% prior
- May's camp said to be bullish about DUP falling into line on Brexit deal
- EU says will publish opinion on Italy's revised budget on 21 November
- Technical Brexit agreement sees future of Irish border to be decided by July 2020 - EU sources
- Malmstrom: EU will hit back if US imposes tariffs on cars
- Eurozone Q3 GDP (second reading) +0.2% vs +0.2% q/q prelim
- ECB's Knot: Impact of economic slowdown not enough to change outlook
- UK October CPI +0.1% vs +0.2% m/m expected
- OPEC+ reportedly discussing oil supply cut of 1.4 mil bpd
- IEA says return of oil surplus should be welcomed
- DUP's Foster: Cannot agree to a deal that leaves us adrift from the rest of the UK
- ECB's Weidmann: Normalisation process should not be unnecessarily long
- DUP's Donaldson: This deal is not the right Brexit
- Germany Q3 flash GDP -0.2% vs -0.1% q/q expected
Markets:
- NZD leads, CHF lags on the day
- European equities lower, oil stocks weigh; E-minis flat so far
- US 10-year yields down 0.2 bps to 3.137%
- Gold down 0.02% to $1,202.02
- WTI up 0.99% to $56.25
- Bitcoin dopwn 1.13% to $6,209
It's been a session dominated by Brexit headlines once again as Theresa May prepares for the Cabinet meeting to come later at 1400 GMT, where ministers are expected to sign off on a Brexit deal that will bring us to a EU summit at the end of this month.
However, with all that very much a given, markets started turning their attention to the meaningful vote in parliament instead and hopes of that swung around throughout the day and is what led to a volatile session for the pound.
GBP/USD started off around 1.3000 before moving lower to 1.2960 as DUP members said they would not vote in favour of May's Brexit deal. That was followed by another hit lower to 1.2905 as the pound faltered once details of the Brexit text began to surface. It showed from a legal standpoint there was nothing different to what it was a couple of weeks ago, which means parliament is likely to vote it down.
GBP/USD then took a further hit falling to 1.2886 before recovering back to 1.2940 as reports stated that DUP will still back May's Brexit deal in a vote. The pair now climbs back to 1.2960 levels again as May continues to sound confident in the PMQs ahead of the Cabinet meeting later.
The euro was also taken for a bit of a ride alongside the pound, with EUR/USD starting the session around 1.1300 before slipping to a low of 1.1263 as the session moved along. But as the pound recovers, the single currency also edged higher with EUR/USD now back up to 1.1285.
USD/CAD was in for a decent session as well with the pair trading around 1.3230-40 levels for the most part but fell as oil prices caught a bid after a report by Reuters said OPEC+ members were looking to cut 1.4 mil bpd in production. Oil was trading about 0.4% lower before recovering to trade close to 1.0% higher and that helped USD/CAD move lower to 1.3220 levels where it trades currently.
The leader among the major currencies bloc though is the kiwi as it benefited from cross selling in AUD/NZD as well as short covering in NZD/USD. The chart in the latter continues to hold up above the 100-hour MA, which indicates a more bullish near-term bias, and the pair traded around 0.6780-00 for the most part.
Looking at the session ahead, focus of markets will still be on Brexit but there is some event risk to come as we have the US October CPI report due at 1330 GMT. That will help to provide a catalyst for movement in dollar pairs so be wary of the release.
