Forex news from the European morning session - 20 February 2019
Headlines:
- UK PM May: What matter is legally-binding changes to the Irish backstop
- US MBA mortgage applications w.e. 15 February +3.6% vs -3.7% prior
- Conservative MPs said to have announced their resignation
- UK February CBI trends total orders 6 vs -5 expected
- Chinese premier Li Keqiang: China has not and will not change prudent monetary policy
- ECB's Praet: Normalisation of central bank instruments is not akin to policy tightening
- China says that it won't use exchange rate as a tool in trade dispute
- BOJ's Kuroda: Currency rate is decided by various factors
- Japan's Motegi: Currency clause not discussed last September in talks with US
Markets:
- CAD leads, NZD lags on the day
- European equities mildly higher; E-minis flat on the day
- US 10-year yields flat at 2.635%
- Gold up 0.2% to $1,343.69
- WTI down 0.5% to $55.79
- Bitcoin up 1.2% to $3,936
The pound was the currency in focus on the session as it slipped on jitters surrounding UK politics as three Tory lawmakers resigned to join The Independent Group. The rumour already came about yesterday but started to gain traction this morning and that saw cable fall from 1.3060 to 1.3030-40 levels.
And as the news was made official, the pound fell further with cable dropping to a low of 1.3012 before recovering some poise to move back up close to 1.3040 now. As mentioned earlier here, it isn't going to be a game-changer for Brexit votes so for the time being, this is merely just a dent to the government's confidence.
That said, if further resignations are to come about, it could throw the pound into more of a flux with May now commanding a borderline majority (324 MPs; majority line is seen at 322 MPs) in parliament.
Other currencies traded in a more subdued manner for the most part against the dollar with traders eyeing the January FOMC meeting minutes release later today.
The kiwi remains on the back foot as it struggled since Asian trading on the back of cross selling against the aussie notably. NZD/USD began the session around 0.6865-70 before hitting a low of 0.6850 but is back to trading at the early morning levels again now.
USD/JPY traded in a confined manner as the yen remains pressured following poor Japanese trade balance data earlier on, in which exports were seen slumping heavily. The pair began the morning around 110.80 before tracking to a high of 110.95 and then backing off now to trade around 110.70 levels. Do note that there are large expiries between 110.75-85 to keep price action anchored around current levels.
The loonie was the major surprise on the day as USD/CAD continues to be weighed down near the lows ahead of North American trading. The pair is trading back under the 100-day moving average and sellers remain in near-term control despite weaker oil prices on the day.
Looking ahead, risk sentiment remains rather tepid with markets waiting on trade talks in Washington tomorrow. Hence, expect trading sentiment to be largely dominated by what the FOMC meeting minutes may suggest later today. Do be reminded that the media embargo system is cancelled, so the release will be via the Fed's website so it could be potentially delayed by a few seconds/minutes.
