Forex news from the European trading session - 18 October 2018
Headlines:
- May said to be 'flaunting' Brextra time on worries that EU could be ready for no-deal outcome
- UK government official: Extension of Brexit transition period is an option
- Italy's Tria: Growth estimates in budget are conservative
- ECB's Nowotny says would welcome Weidmann candidacy to succeed Draghi
- UK September retail sales -0.8% vs -0.4% m/m expected
- ECB's Rehn says risks of no-deal Brexit has grown over the past few months
- UK PM May: There is an idea to create option to extend transition period for a few months
- Germany September wholesale price index +0.4% vs +0.3% m/m prior
- Switzerland September trade balance CHF 2.43 billion vs CHF 2.13 billion prior
- Italy's Salvini reportedly considering to run for European Commission presidency next year
- BOJ downgrades assessment for 2 of 9 regions in latest economic report
Markets:
- AUD leads, CAD lags on the day
- European equities mostly lower alongside US equity futures
- US 10-year yields down 0.7 bps to 3.198%
- Gold up 0.18% to $1,224.54
- WTI down 0.97% to $69.08
- Bitcoin down 0.06% to $6,434
The session started off on a slower note with the aussie gaining on the back of a lower headline unemployment rate in Asian trading and the dollar stayed bid following the hawkish Fed minutes overnight. Although gains were minimal, it was clear that there was a bit of a trend in markets. EUR/USD fell from 1.1500 to 1.1482 and GBP/USD dropped to 1.3076 from 1.3090 levels to begin the session.
At the same time, USD/JPY also hugged the lows as US equity futures continued to trade softly alongside Asian equities. The pair traded around 112.45 to 112.55 as we headed into early European trading.
But as the session progressed, risk started turning around a little with E-minis paring earlier losses and that resulted in the yen and dollar falling a little across the board. EUR/USD rose back up to 1.1510 and GBP/USD jumped to 1.3115 paring all of its earlier losses on the day.
Other major currencies also took advantage of the dollar's tepidness and gained further with GBP/USD extending its gains to 1.3131 after a hiccup from the softer retail sales data. But as we closed out the session, the pound got hit by Brexit headlines and erased all of the gains for the day now with cable hugging the 1.3100 handle ahead of US trading.
AUD/USD maintained its composure for majority of the session having started around 0.7130 levels before advancing to a high of 0.7151 where it trades close to currently. NZD/USD also saw similar price action as it traded around 0.6550 early on before rising up to a high of 0.6578 and is trading just off that now.
USD/CAD is the one pair that sees the dollar performing better as a result of weaker oil prices. The pair touched a high of 1.3056 mid-way through European trading and continues to trade near the highs at the moment as oil prices continue to sink further in the session.
Looking ahead, focus for markets will once again be the performance of the US cash equity market as that will ultimately drive risk sentiment and stay vigilant on more Brexit news to come. If you're trading the loonie, just keep an eye on oil.
