Forex news from the European trading session - 18 September 2018
Headlines:
- Wilbur Ross says purpose of US tariffs is to modify China's behaviour
- EU's Malmstrom says latest round of US tariffs on China is an unfortunate escalation
- Oil jumps as Saudi Arabia said to prefer Brent above $80 per barrel
- Italy June industrial orders -2.3% vs +3.6% m/m prior
- SNB seen raising rates in Q4 2019 now - survey
- EU does not plan to issue a statement on Brexit at Salzburg meeting
- China says it has no choice but to retaliate against latest US tariffs
- UK's Raab: We already made major compromises, now the ball is in EU's court
- PBOC adviser says that monetary policy cannot be so loose that it undermines deleveraging efforts
- Italy's Di Maio: If things continue like this, Tria can go home
Markets:
- AUD leads, JPY lags on the day
- European equities mostly higher, FTSE MIB only laggard
- Gold down 0.08% to $1,200.48
- WTI up 1.41% to $69.88
- US 10-year yields up 0.9 bps to 2.996%
- Bitcoin up 0.66% to $6,258
The trading landscape today is dominated by the fact that US finally decided to announce the additional $200 billion worth of tariffs on Chinese goods. The headline hit after US markets were closed and risk assets saw a dip in Asian trading. But soon enough, market sentiment recovered and risk trades started becoming the hot pick of the bunch with markets doing what they do best when it comes to the trade rhetoric in 2018, and that is to fade it.
The start of European trading saw risk assets extend their gains as Treasury yields inched higher alongside a jump up in S&P 500 futures. AUD/USD pushed to a high of 0.7221 from around 0.7190 levels with NZD/USD showing similar poise touching a high just above the 0.6600 handle from around 0.6580 levels.
The dollar and the yen were the two main laggards in all of this, especially the latter, as a combination of higher Treasury yields and US equity futures saw USD/JPY touch two-month highs of 112.28. Although the greenback strengthened against the yen, it fell against the rest of the major bloc with the dollar index threatening a break below the 100-day MA again.
During the time, EUR/USD traded higher from around 1.1690 to touch a high of 1.1718 while GBP/USD also touched a high of 1.3171 from around 1.3150 levels.
Although widely expected, China's announcement to retaliate in kind against the US gave risk assets a reality check and markets corrected some of its earlier gains. The yen and dollar were bid on the back of the headline although China offered no details on its retaliatory measures.
USD/JPY fell from 112.25 to just under 112.00 before settling between a 111.90 and 112.10 for the rest of the session. EUR/USD pared earlier gains and fell from 1.1710 to around 1.1680 where it continues to trade since. The pound was among the key losers in all of this - weighed down by the fact that there won't be any substantial progress from Brexit talks in Salzburg this week as well - with GBP/USD falling from 1.3160 to a low of 1.3119 before recovering a little now to 1.3130 levels.
Towards the end of the session, oil prices saw a spike as Saudi Arabia is said to be comfortable with Brent above the $80 handle. It's not a new headline per se as they have made similar comments in the past, but it was enough of a reason for oil traders to take price higher. Both Brent and WTI are up by more than 1% on the day now and that helped USD/CAD to a low of 1.3013 earlier, testing the 100-hour MA before bouncing a little thereafter.
In the midst of all of this, the aussie and kiwi held onto their early morning gains and continue to lead the rest of the pack ahead of US trading. AUD/USD settled around 0.7190 to 0.7210 while NZD/USD has sat between 0.6580 to 0.6595 levels after slipping a little of their highs following the China retaliation headline.
The rest of the market are also showing decent signs of improved risk sentiment with European equities and US equity futures trading a little higher while Treasury yields are holding up with 10-year yields still pivoting around the 3% handle.
