Forex news from the European morning session - 2 November 2018
Headlines:
- More details on the story of Trump calling for a possible trade deal with China
- UK October construction PMI 53.2 vs 52.0 expected
- Eurozone October final manufacturing PMI 52.0 vs 52.1 prelim
- Germany October final manufacturing PMI 52.2 vs 52.3 prelim
- France October final manufacturing PMI 51.2 vs 51.2 prelim
- Italy October manufacturing PMI 49.2 vs 49.7 expected
- Switzerland September retail sales -2.7% vs -0.1% y/y expected
- Spain October manufacturing PMI 51.8 vs 50.8 expected
- BOE's Broadbent says that impact of no-deal Brexit is difficult to see
- Trump reportedly plans 'meeting plus dinner' with Xi on 1 December
- Germany September import price index +0.4% vs +0.4% m/m expected
- Oil waivers on Iran sanctions reported to only be temporary
- China says that Trump-Xi phone conversation was 'quite positive'
- US is said to give 8 countries oil waivers under Iran sanctions
- Trump is said to ask Cabinet to draft possible China trade deal
Markets:
- AUD leads, JPY lags on the day
- European equities trade higher, E-minis up 0.8%
- US 10-year yields up 3.1 bps to 3.161%
- Gold up 0.16% to $1,235.50
- WTI down 0.03% to $63.67
- Bitcoin up 0.07% to $6,340
The session started off with already an improved tone in risk sentiment as the aussie and kiwi were leading the charge in Asian trading. Then came the headline saying that Trump is looking for a possible trade deal with China and risk assets got a lift from that. The headline sent USD/JPY up from 112.70 to a high of 113.10 as E-minis and equities jumped as well.
It basically set the tone for the session as hopes of a US-China trade resolution helped to fuel risk assets and also saw Asian currencies stomp the dollar. As a result, the yuan has recovered to a one-month high against the greenback and we're seeing the dollar stay offered following yesterday's dismal performance as well.
EUR/USD started the session around the 1.1400 handle but then inched higher to 1.1430 as the greenback slipped ahead of European markets open. The pair steadily moved higher as the dollar remains offered and trades near the highs now close to 1.1450.
GBP/USD started the session more timid just under 1.3000 but quickly moved up to 1.3025 as the dollar faltered. Brexit headlines were few and far between today but that didn't dent optimism in the pair and it moved to a high of 1.3041 following positive economic data but now settles around 1.3025 again.
The Australian dollar remains the star of the show so far today as AUD/USD started the session around 0.7230-40 levels and then ran up to 0.7250 before settling just under it. But as risk holds steady ahead of US trading the pair is now running back up to the highs and is at the 0.7250 level again after having reached a high of 0.7259.
NZD/USD wasn't as perky but stayed solid nonetheless as the pair range traded around 0.6660-80 for the most part but is now trading near the highs just above 0.6680 ahead of US trading.
Moving on to the session ahead, it's all about the US jobs report and whether or not it will put a dent on the risk-on mood we're seeing currently. If wages come in strong, it may hurt equities sentiment a little but given that Wall Street has been starved of a good run higher after October, I doubt it will be enough to put the flames out of the rally we're seeing today.
With dollar sentiment also looking iffy, unless payrolls and wages are a blowout, it's hard to see the greenback sustain any gains seen after the report. It promises to be a fun and wild end to the week so be safe and have a great weekend in advance!
