Forex news from the European trading session - 16 October 2018

Headlines:

Markets:

  • GBP leads, JPY lags behind on the day
  • European equities trade higher
  • US 10-year yields up 1.3 bps to 3.169%
  • Gold up 0.17% to $1,229.29
  • WTI down 0.81% to $71.20
  • Bitcoin up 0.88% to $6,447

The session started with a sense of calm as US equity futures shrugged off overnight declines in Wall Street. That led to a much firmer performance in Asian equities and as a result, the yen was on the back foot to begin trading. USD/JPY started the session around 112.05 as E-minis were around 0.3% to kick things off.

There wasn't much of a pullback in gains and when E-minis broke higher to post 0.5% gains, USD/JPY moved higher to 112.17 and that saw yen pairs jump up as well with EUR/JPY cracking the 130.00 handle and GBP/JPY threatening a break of the 148.00 level.

The resulting move higher in yen pairs also lent a bid to the pound as cable moved from 1.3170 levels to a high close to 1.3200 ahead of the UK labour market report. The data was a beat and that saw the pound extend its gains with cable jumping to a high of 1.3209 before tailing off towards the 1.3180-90 levels once again.

But as the session progressed, the pound found a second wave of bids and cable moved up from 1.3190 to a high of 1.3228 where it trades close by now. The Brexit rhetoric remains the key driver in trading the pound and tomorrow's summit between European leaders will be telling about Theresa May's proposals and if a November timeline is still deemed fit for a deal to be made.

The rest of the session played out tepidly with most major currencies seen ranging for the most part. EUR/USD started the session around 1.1570 before threatening a break of the 1.1600 handle as the euro followed the pound higher as the yen weakened. But the single currency once again failed to hold onto gains and slipped back to near unchanged levels now close to 1.1580.

NZD/USD remains one of the big movers on the day as the kiwi gained on the back of better-than-expected inflation data in Asian trading. The pair started the session a little softer around 0.6560 and traded tepidly between that level and 0.6590 before closing off the session close to 0.6580 currently.

AUD/USD stayed more subdued with the aussie unable to benefit from the kiwi's gains today. The pair began around 0.7130 before tracking to a low of 0.7112 and then now moving back up again to near unchanged levels on the day.

Looking at the session ahead, it's all about risk sentiment in markets still as volatility starts to settle down. The VIX is now back below 20.00 as investors are getting less jittery about a potential downturn in stocks. But that doesn't mean we're clear of any major risks just yet.

There are still tepid tones in US equities and the cash equity market performance is all that matters right now. So, let's see what we have in store for us in trading later.