Forex news from the European morning session - 31 October 2018
Headlines:
- ECB's Rehn says inflation is gradually converging to target
- ECB's Rehn says Q3 economic growth deceleration is partly temporary
- Italy's Tria: Yields spread driven by politics, not economic fundamentals
- ECB's Nowotny: Sees 'slight' downward revision to central bank's economic outlook
- US MBA mortgage applications w.e. 26 October -2.5% vs +4.9% prior
- Italy October preliminary CPI 0.0% vs +0.2% m/m expected
- Eurozone September unemployment rate 8.1% vs 8.1% expected
- Eurozone October preliminary CPI +2.2% vs +2.2% y/y expected
- ECB's Hansson: No significant change to raise doubt over central bank's forecasts
- BOJ tweaks bond-buying plan for third month in a row
- Switzerland October Credit Suisse investor sentiment -39.1 vs -30.8 prior
- Spain Q3 flash GDP +0.6% vs +0.6% q/q expected
- France October preliminary CPI +0.1% vs +0.2% m/m expected
- BOJ's Kuroda says not considering expanding range of 10-year bond yields
- BOJ's Kuroda: Will adjust monetary policy if downside risks materialise
- Germany September retail sales +0.1% vs +0.5% m/m expected
- BOJ's Kuroda: Overall picture of Japan's inflation hasn't changed
- BOJ's Kuroda says risks are skewed to downside for economy, prices
Markets:
- GBP leads, CAD lags behind on the day
- European equities trade higher, E-minis up 0.7%
- US 10-year yields up by 1.5 bps to 3.138%
- Gold down 0.40% to $1,217.98
- WTI up 0.41% to $66.45
- Bitcoin flat at $6,264
The session started off with the focus being on a recovery in risk once again and that pushed the Japanese yen lower as Asian equities posted solid gains and E-minis traded about 0.3% higher to begin with. USD/JPY started the day at the highs around 113.30 as the BOJ also moved to trim its inflation forecasts.
As the session moved along, the risk recovery spread to Europe but currencies in particular isn't buying into the story just yet with the yen recovering from earlier losses and holds relatively steady against the major bloc - aside from the pound - even as E-minis trade 0.7% up currently. USD/JPY gradually slipped to close to the 113.00 level where it trades just above ahead of US trading.
The big story of the day is the pound as the currency recovered from yesterday's losses. The downside move yesterday was largely driven by negativity in general and after finding a base of around 1.2700 against the dollar, the pound recovered well to inch higher on the session towards resistance from Friday's low @ 1.2777. Cable trades just under that now as we await US traders with further resistance seen at 1.2793 and the trendline resistance at around 1.2800.
The rest of the major bloc traded sideways mostly with the euro stuck in a narrow range still eyeing the year's lows against the dollar. EUR/USD rose to a high of 1.1360 in Asian trading before falling to a low of 1.1331 after poor data from Germany (retail sales) but then traded around 1.1340-50 for the remainder of the session.
The commodity bloc is trading a little lower on the day but have recovered off the lows seen in Asian trading, with the aussie paring losses against the dollar now heading back towards 0.7100 after having traded around 0.7080-95 for the majority of the session.
Looking ahead, markets will be seeking some calm from US equities and that will help with general direction for yen pairs but be on the look out for a squeeze in the pound or a potential turnaround as we approach key resistance levels. That for me will be the two key opportunities to watch out for.
