Forex news from the European trading session - 19 June 2018
Headlines:
- UK government will not accept parliament proposal on meaningful vote over Brexit deal - Reuters
- Eurozone April construction output +1.8% vs -0.3% m/m prior
- ECB's Liikanen says can hold rates even after summer 2019 if needed
- Iran, Algeria, Venezuela oppose immediate oil output increase - Reuters
- OPEC technical panel believes market could absorb extra production due to strong demand - Reuters
- EU's Barnier says UK needs more realism on what's possible after Brexit
- ECB's Draghi says that inflation gradually returning towards our objective
- Eurozone April current account NSA +€26.2 bn vs +€40.6 bn prior
- ECB's Lane says inflation is low around the world
- China urges US to stop deeds that will hurt others and itself
- China reiterates it does not want a trade war, but is not afraid of one
- Swiss economy seen growing by 2.4% in 2018 in latest government forecasts
Markets:
- JPY leads, AUD lags behind on the day
- European equities are all lower - DAX leading losses -1.3%
- Gold up by 0.07% to $1,279.23
- WTI down by 1.34% to $64.97
- US 10-year yields down by 4 bps to 2.876%
- Bitcoin down by 0.49% to $6,694
The session started off with mild risk-off tones as the trade rhetoric between US and China dominated trading today. The Japanese yen lead the way and commodity currencies were under a little pressure to kick things off. But as European traders enter, we saw more flows out of equities and things in China turned a bit ugly as well with S&P 500 futures also falling heavily.
That prompted an extension of the risk-off tones as the yen, swissie, and dollar pulled ahead of the rest while the aussie and kiwi lagged behind. The rest of the day played out in similar fashion with the market favouring moves into the yen and the dollar for the most part as European equities falter while bonds stayed bid.
EUR/USD traded lower towards the 1.1600 handle initially but slowly moved towards a low of 1.1531 on the day before bouncing to 1.1550 now. GBP/USD on the other hand stayed subdued and is trading at the year's lows after breaching below 1.3200 with Brexit uncertainties also weighing on sterling in addition to being offered from the risk-off environment.
USD/JPY saw a bit of a different session with the pair starting off at the lows at 109.55 as the Nikkei fell into the close to end at session lows. But as the dollar kept up and posted new highs since July last year, the pair steadily climbed towards 109.80 levels and have stuck there since.
As for commodity currencies, it was a rather straightforward day of trading with the kiwi, aussie, and loonie all offered with equities encountering a sea of red. Diverging yields continue to pin down the aussie too against the dollar while the loonie is facing additional pressures as oil continues to trade near the lows for the day.
Apart from all the currency action, we also had Draghi cementing rate hike expectations for a move in September 2019 or later. And on Brexit, it looks like Theresa May is set for a crucial day tomorrow with another vote at the House of Commons to come and she has stated today that the government will not accept the amendment from the parliament proposal on the meaningful vote on the Brexit deal. It just puts things at odds even more with May and UK lawmakers.
We also heard some reports from OPEC about going through with oil output increases but that was followed by a report that Iran and Venezuela will not be agreeing to such an agreement. That should add some spice in the coming days when the countries meet to discuss on the OPEC+ agreement.
But for now, all eyes are focused on the US-China trade rhetoric and that is the central theme in trading so far today.
