ForexLive European FX news wrap: UK inflation drop gives BOE more reason to act
Forex news from the European morning session - 15 January 2020
- Mnuchin: There will be additional tariff rollbacks in Phase Two of China trade deal
- ECB's Holzmann: ECB strategic review will start next week
- UK December CPI +1.3% vs +1.5% y/y expected
- BOE's Saunders: Would not say that a rate cut now is precautionary
- German economy expanded at its weakest pace in six years in 2019
- BOE's Saunders: Aggressive steps needed given limited monetary policy space
- OPEC+ reportedly begin consultations to postpone deal decision to June
- BOJ cuts economic assessment for 3 of Japan's 9 regions in latest quarterly report
- CHF leads, AUD lags on the day
- European equities a little softer; E-minis flat
- US 10-year yields down 1.4 bps to 1.797%
- Gold up 0.3% to $1,550.35
- WTI flat at $58.22
- Bitcoin up 0.1% to $8,748
Markets stayed relatively calm in general as it is all about the anticipation ahead of the US-China Phase One trade deal signing at 1630 GMT.
There's a slight hint of softness in European stocks as well as bond yields, with US futures also keeping near flat levels ahead of the open in a few hours' time.
In the currencies space, action was more subdued but there was some mild movement with the franc staying firm, carrying gains from yesterday. Meanwhile, USD/JPY kept around 109.85-00 as traders continue to wait for more direction later today.
The pound was a notable mover as cable went from a high of 1.3043 at the end of Asia Pacific trading to 1.3010, before nudging below the 1.3000 handle after UK annual inflation hit a fresh three-year low.
That spurred an increase in BOE rate cut odds with the rates market almost fully pricing in a 25 bps rate cut by the May meeting, with odds of a move on 30 January rising to ~57%.
Large expiries are seen around 1.2960-70 and 1.3000, so that is perhaps what is also helping cable to stay afloat for now - with markets also keeping one eye on trade.
The dollar is trading more mixed, keeping gains against the aussie and kiwi but is lower against the euro - though trading ranges remain relatively narrow for the most part.
Looking ahead, it's all about the US-China trade deal signing and whether or not the details will offer anything significant for markets to chew on. As such, risk trades will be the ones most reactive to this so make sure to keep an eye on that later today.