Forex news from the European trading session - 17 October 2018
Headlines:
- Merkel says Irish border is the key obstacle in Brexit talks
- UK PM May insists that Chequers plan is not dead
- US MBA mortgage applications w.e. 12 October -7.1% vs -1.7% prior
- China premier Li says expects economic growth to maintain within reasonable range in Q3
- EU official says many countries want a no-deal Brexit summit in November
- Italy's Buffagni says cannot rule out credit rating downgrade
- Eurozone August construction output -0.5% vs +0.3% m/m prior
- Eurozone September final CPI +2.1% vs +2.1% y/y prelim
- UK September CPI +0.1% vs +0.3% m/m expected
- China September M2 money supply +8.3% vs +8.3% y/y expected
- OPEC said to have asked members not to mention oil price in policy talks
- ECB's Praet: Forward guidance supports a durable return of inflation to central bank's target
- Ireland's Coveney says that likely dates will be suggested for new Brexit summit
Markets:
- USD leads, GBP lags on the day
- European equities are mostly lower, erasing early gains
- US 10-year yields flat at 3.162%
- Gold up 0.14% to $1,226.66
- WTI down 0.49% to $71.57
- Bitcoin down 0.44% to $6,432
The session started off with a more positive tone in markets as US equity futures traded higher and the dollar picked up some bids from Asian trading. EUR/USD started the session on the back foot at around 1.1560 before extending its fall towards 1.1540 levels.
The slightly positive tone in equities help gave a lift to European stocks at the open but that didn't last too long as E-minis started to slide later in the session. Currencies remained calm though initially but as we start moving into US trading the dollar and yen are the two currencies that are bid as market sentiment remains tepid.
As a result of the last move, EUR/USD has fallen to a low of 1.1531 on the day and sits near the lows currently. USD/JPY was more subdued as it hit a low of 112.15 in early European trading but thereafter stuck around 112.20 to 112.30 levels as the dollar and yen traded in similar vein throughout the session for the most part.
GBP/USD was one of the livelier pairs as the pound found itself weighed down by Brexit talks ahead of the summit in Brussels. The pair started the session around 1.3180 before falling to 1.3150 as softer expectations of progress in Brexit talks weighed on the quid and a weaker-than-expected UK inflation report sent cable slipping to 1.3120 levels. As the dollar continued to stay bid on the session, the pair is now trading nears the lows threatening a break of the 1.3100 handle.
NZD/USD started the session on the front foot with the kiwi still gathering bids from yesterday's solid inflation data. The pair began around 0.6580 levels before pushing higher to test the 0.6600 handle once again. However, resistance levels near the figure handle proved to be a bit much for buyers and the pair surrendered gains to fall flat at 0.6575 before tracking lower to 0.6560 as the dollar and yen gained some traction.
A similar case is seen for the AUD/USD but in a smaller range with the pair rising to 0.7160 as the kiwi was also bid but then fell in the latter stages alongside other major currencies and trade near the lows now at 0.7120.
Looking at the session ahead, focus will turn towards risk sentiment and how US equities perform again. But the bigger question for currency traders now will be, is the dollar back? With risk looking skittish, the yen and the dollar are the two leading currencies and suddenly the idea of last week's lack of haven appeal for the greenback appears to be forgotten.
