ForexLive European morning FX news wrap: Risk steadies ahead of US payrolls, Powell
Forex news from the European morning session - 4 January 2019
- PBOC says to strengthen guidance of market expectation this year
- EU said to mull 30 January deadline for bids to succeed ECB chief economist Peter Praet
- Eurozone December preliminary CPI +1.6% vs +1.7% y/y expected
- UK December services PMI 51.2 vs 50.7 expected
- PBOC cuts banks' RRR by 1%
- Eurozone December final services PMI 51.2 vs 51.4 prelim
- ECB's Coeure: There is always a risk of a financial crisis
- France December preliminary CPI 0.0% vs +0.1% m/m expected
- ECB's Coeure: Interest rates are to remain low for as long as necessary
- UK December Nationwide house price index -0.7% vs +0.1% m/m expected
- Japan's Aso says that stock prices have 'heavy emotional influence'
- AUD leads, JPY lags on the day
- European equities higher; E-minis up 1.3%
- US 10-year yields up 5.1 bps to 2.604%
- Gold down 0.2% to $1,291.13
- WTI up 2.1% to $48.06
- Bitcoin down 0.5% to $3,777
It was a pretty straightforward session as risk sentiment held steady following up with earlier gains seen from Asian trading. AUD/USD started the session on the front foot at 0.7020 before racing higher to 0.7054 as the PBOC announces that it would cut RRR by 100 bps to cover liquidity ahead of the lunar new year holiday.
Meanwhile, USD/CAD steadily moved lower as the loonie continues to benefit from the rise in oil prices on the day. The pair started around 1.3470 before moving to lows currently seen around 1.3430 levels as oil pushes gains of more than 2%.
Apart from that, the pound was the only other notable mover with the quid gaining in European trading after an earlier report in the day suggesting that European leaders will provide Theresa May with "clarifications" to help win over parliament. But it must be said that those clarifications are far from the necessary "legal assurances" so I'm not sure how that actually helps.
Either way, GBP/USD moved up from 1.2630 to a high of 1.2695 during the session but ran into key near-term resistance levels and is still hugging those key levels now around 1.2670-80.
There wasn't much movement in other major currencies as markets turn their focus towards the US non-farm payrolls report to come later. As mentioned earlier, the release this time around is a bit more tricky as markets are trying to get a grip on "how well the US economy is really doing".
Hence, expect some focus to be on the job figures/unemployment rate but keep an eye out on wages data as well. Poor figures will only feed into the doom and gloom rhetoric and exacerbate further fear in markets as we kick start the year.
As a reminder, it's not just about the non-farm payrolls report today as Fed chair Powell will also be speaking later at 1515 GMT. Markets will be looking for clues on whether or not the Fed will pause its tightening cycle or if Powell will reaffirm that some hikes will at least come this year.