Forex news from the European trading session - 18 May 2018
Headlines:
- UK government spokeswoman says new Brexit backstop plan is a 'fallback'
- EU starts process to block US sanctions on Iran
- Eurozone March trade balance €21.2 bn vs €21.0 bn expected
- Finland confirms Olli Rehn as central bank governor
- Italy government programme does not include any plans for Euro exit or referendum
- Five-Star's Di Maio says final government contract has been agreed
- Eurozone March current account NSA +€40.6 bn vs +€22.7 bn prior
- Chinese state media says offer to US on trade gap is 'non-existent'
- China denies that it offered to reduce trade surplus with US by $200 bn
- Fed's Mester: US economy performance is near Fed's policy goals
- Germany April PPI +0.5% vs +0.3% m/m expected
- Germany April wholesale price index +0.5% vs 0.0% m/m prior
Markets:
- NZD leads, GBP lags on the day
- European equities mixed, mostly flat, Italy's FTSE MIB down 1.2%
- Gold down by 0.27% to $1,287.27
- WTI up by 0.07% to $71.54
- US 10-year yields flat at 3.105%
- Bitcoin down by 0.95% to $8,127
The session started slowly for the most part, with the lack of key economic data releases leading to a more subdued trading day than normal. Things started kicking into life when China denied earlier reports that they were willing to offer concessions to the US on the trade rhetoric, with overnight reports of a $250 bn offer said to be "non-existent".
Although markets were smart enough to not get too sucked in by the enticing figure (it's an impossible one to actually achieve in reality), stocks still did take a bit of a minor hit with European equities nudged lower upon the release of the news.
It was more quiet in the currencies space, as the moves came a bit later in the session. The dollar started to make some strides once again, with EUR/USD falling below 1.1800 and GBP/USD tracking below 1.3500 as well, while USD/JPY looks to break above 111.00.
And that led to the dollar index briefly touching a fresh five-month high of 93.636 on the day. It continues to trade near the highs currently at 93.589, up by 0.13%.
Despite the earlier NAFTA headlines in Asia, there was no follow through selling in the loonie in European trading. But let's wait till we our North American traders come back into action later on with Canada inflation and retail sales figures on the agenda as well.
Other than that, Italy finally forms a government with Five Star Movement and Lega agreeing upon a government programme - in which the €250 bn debt write-off was dropped, along with the process to exit the Euro or any referendum related to it. Italian stocks continue to take a hit with banking stocks dragged lower, as 10-year bond yields edge higher to the highest levels since October last year.
As Adam pointed out yesterday, the situation in Italy is also helping flows into the swissie - along with other geopolitical plays (US-EU on Iran, US-China trade, NAFTA) - and that has seen the swissie be the second best performing major currency on the day.
