Forex news from the European trading session - 15 June 2018
Headlines:
- ECB's Nowotny says that governing council decision yesterday was unanimous
- Italy May final CPI +0.3% vs +0.4% m/m prelim
- Eurozone Q1 labour costs +2.0% vs +1.5% y/y prior
- Eurozone April trade balance €18.1 bn vs €20.0 bn expected
- Eurozone May final core CPI +1.1% vs +1.1% y/y prelim
- ECB's Coeure says inflation to 'durably' converge closer to 2%
- ECB's Nowotny says inflation goal of 'close to 2%' is achieved
- Italy April industrial orders -1.3% vs +0.5% m/m prior
- US said to near a second tariffs list on Chinese goods worth $100 bn - Reuters
- BOJ's Kuroda says it is hard to tell if yen will weaken on central bank divergence
- BOJ's Kuroda says long-term price expectations have been slow to improve
- BOJ's Kuroda says that economy is expanding moderately
- ECB's Coeure says growth in Europe is still strong
- Bundesbank lowers Germany economic growth estimates for 2018
- China says it will take 'appropriate' measures if US rolls out tariffs
- Germany May wholesale price index +0.8% vs +0.5% m/m prior
Markets:
- EUR leads on the day, NZD lags behind
- European mostly lower as US equity futures also dragged down
- Gold down by 0.25% to $1,298.95
- WTI down by 0.30% to $66.69
- US 10-year yields down by 1.3 bps to 2.922%
- Bitcoin down by 1.06% to $6,588
The session started off slow with the dollar and euro holding steady for the most part. But things soon picked up with the dollar index climbing to post fresh highs for the year.
But the euro soon made a comeback and EUR/USD climbed to levels just under the 1.1600 handle and at the same time we saw more attention being cast upon the report that the US may introduce a second list of tariffs against Chinese goods.
EUR/USD consolidated for a while here before breaking above the figure level to post a high of 1.1615 and now trading back under it. Again, be wary that there are large expiries sitting at 1.1600 so that will act as a magnet for the pair on a day like this.
USD/JPY started on a bright note, testing the 110.90 handle early on before Kuroda's presser. But the pair encountered rejection there near key levels around 110.85 and fell to around 110.70. Kuroda didn't offer much but it was the trade story that really got the pair moving. US 10-year yields slipped a little as well on the report and USD/JPY fell to around 110.50 levels before posting a low of 110.39 and then recovering some ground now.
GBP/USD was subdued around the 1.3260-70 levels for the most part before climbing to a high of 1.3292 when the dollar gave up some gains late on. The pair now just trades a little lower from the highs.
Commodity currencies failed to see any reprieve on the day with the loonie and kiwi in particular lagging behind. The aussie pared some losses against the dollar when the latter weakened but soon returned to levels where it started the session after.
Moving into the US session, it's going to be all about the trade rhetoric between US and China. Equities are now starting to see some negativity with European stocks and US equity futures also down near the lows for the day.
There's only two ways this will play out later. One is that it looks like the trade rhetoric appears to be blown over proportion as only equities are seeing some jitters and we'll get a reversal later. And the second, is that the FX and bond market is just caught napping and when the tariffs are announced later we'll see bonds rally and a much clearer risk-off mood in the FX space.
The first option wouldn't make for an exciting session I reckon, but it's really been a surprise how well Treasuries and currencies like the yen has been taking in the news so far. Though the second option may not come to fruition, don't say you have not been warned. It's always best to not be complacent and stand ready for such events to transpire.
