Forex news from the European morning session - 23 July 2019
Headlines:
- Boris Johnson announced as new British prime minister
- Boris Johnson reportedly set to avoid an immediate no confidence vote in his new government
- UK July CBI trends total orders -34 vs -15 expected
- BOJ is said to likely downgrade inflation forecast for FY 2019 at next week's meeting
- PBOC's Yi: Any rate cut will be aimed towards coping with deflation risk
- Japanese government maintains economic assessment for the month of July
- A more detailed look at BOE Saunders' remarks
- BOE's Saunders says central bank isn't bound by forecasts calling for rate hikes
Markets:
- USD leads, NZD lags on the day
- European equities higher; E-minis up 0.3%
- US 10-year yields flat at 2.046%
- Gold down 0.1% to $1,423.03
- WTI down 0.4% to $55.98
- Bitcoin down 3.0% to $10,009
With Brexit being 99 days away, Boris Johnson has been voted in as the new UK prime minister. So, what does that change? For now, essentially it changes nothing. All of the outstanding issues are still there and we're no closer to a solution either.
The pound fell early on in the day in anticipation of the result, with dovish comments by BOE hawk, Michael Saunders, also helping to drive the currency lower. Cable fell from 1.2450 levels to a low of 1.2418 - also helped by dollar demand - before rebounding to 1.2460 on short covering just before Johnson was announced victorious.
In the aftermath, cable rose to a high of 1.2482 (just under the 100-hour moving average) before falling off again now to 1.2450.
While all that was taking place, the dollar was firmer in trading throughout the session as it pushed one-month highs against the euro. EUR/USD fell to a seven-week low of 1.1172 and lingers just around there currently.
Meanwhile, USD/JPY pushed higher to 108.21 from 108.00 at the start of the session with price largely ranging in between there ahead of more than $4 billion worth of expiries rolling off at the figure level tomorrow.
The dollar stayed firm against other major currencies as well with NZD/USD bearing the brunt of the losses as the kiwi stayed weaker after the RBNZ is reportedly starting to explore unconventional policy. The pair fell from 0.6730 to a low of 0.6718 before recovering slightly now to levels seen at the start of the session.
Looking ahead, it's still all about central bank rhetoric with the ECB coming later this Thursday and the key focus still resting on the Fed next week. Besides that, keep an eye out on earnings in the US over the next week as that will help to drive direction in equities.
As for the dollar move today, I wouldn't get too excited. Treasuries are essentially flat and I'm not convinced by the upside move we're seeing as such.
