Forex news from the European morning session - 16 January 2019
Headlines:
- US MBA mortgage applications w.e. 11 January +13.5% vs +23.5% prior
- European Commission says Brexit withdrawal agreement is not open for renegotiation
- CBRT leaves one-week repo rate unchanged at 24.00%
- China premier Li says will keep economic growth within reasonable range in 2019
- ECB's Villeroy says rate increases would depend on economic situation
- UK December CPI +0.2% vs +0.2% m/m expected
- BOE's Carney says market view of Brexit vote most clearly expressed in FX market
- ECB's Villeroy: Eurozone growth is slowing but region is not in a downturn
- ECB's Nowotny: In no way do we see a danger of recession in the Eurozone
- EU's Verhofstadt: It is unthinkable that Article 50 is prolonged beyond European elections
- ECB's Nowotny: Sees continued expansion but at a slower pace in Europe
- DUP's Dodds: Article 50 extension is not inevitable, not necessary in my view
- What you need to know ahead of the UK government no confidence vote later
- US Gov’t shutdown’s limited impact on US Equities
- ECB's Mersch says that Eurozone slowdown broadly in line with expectations
- Goldman Sachs: Tuesday's vote skews risks further towards softer, later Brexit or no Brexit at all
- What will happen next in the Brexit saga as we gear towards the no confidence vote?
Markets:
- GBP leads, NZD lags on the day
- European equities mixed; E-minis up 0.2%
- US 10-year yields up 2.3 bps to 2.734%
- Gold down 0.1% to $1,288.45
- WTI down 1.0% to $51.57
- Bitcoin up 1.9% to $3,636
It was a session mainly dominated by Brexit headlines for the most part but there were a couple of twists and turns along the way as risk turned on its head and also plenty of commentary by ECB officials on the economy.
The pound started off looking rather perky as cable raced to a high of 1.2896 on the day as markets turn their focus towards the confidence vote in parliament later. May and her government is expected to come out on top and market pricing is very much reflecting that sentiment as price ranged between 1.2840-80 on the day.
In the last couple of minutes, the quid also got a shot in the arm as cable jumped from 1.2840 to 1.2890 before settling back in range on a Handelsblatt report that the EU may be ready to make concessions on the backstop to the UK. However, it comes with a very big caveat that they must be initiated from Ireland; which is unlikely to happen.
Meanwhile, EUR/USD settled in a range between 1.1400-25 early on before moving lower after a barrage of commentary from ECB officials with more talks on the R-word (recession). The fact that the R-word is starting to be mentioned more and more is in itself a worrying sign and markets are picking up on that with EUR/USD sliding to a low of 1.378 before recovering slightly to 1.1390 now.
Risk sentiment remained tepid with markets looking a tad jittery resulting in a poor performance by the aussie and kiwi on the day. AUD/USD began the session around 0.7190-00 before slipping further as European equities pared early gains to turn negative mid-way through the morning. The pair fell to 0.7162 before finding support from the 200-hour MA and now trades around 0.7170 levels.
USD/CAD also managed to pull higher on the back of weaker oil prices after equities turned sour and as the dollar caught a bid later in the morning. The pair traded to a low of 1.3245 early one before coming back up to hit a high of 1.3284 and now trades close to 1.3270 ahead of North American trading.
Looking at the session ahead, a lot of focus will be on the confidence vote in the UK but keep an eye on risk as markets are still looking indecisive for the time being. European equities are mixed while US equity futures are a tad higher. Meanwhile, Treasury yields are holding up well which is why yen pairs are also seen to be performing better for the most part this session.
