Forex news from the European morning session - 5 December 2018
Headlines:
- US MBA mortgage applications w.e. 30 November +2.0% vs +5.5% prior
- Brexit legal advice shows that backstop could endure 'indefinitely'
- ECB policymakers said to be debating ideas for gradual stimulus withdrawal next year
- UK's Fox says possibility of no Brexit if parliament rejects deal next week
- Eurozone October retail sales +0.3% vs +0.2% m/m expected
- UK November services PMI 50.4 vs 52.5 expected
- Kuwait says OPEC+ nations haven't yet discuss proposals to cut production
- Eurozone November final services PMI 53.4 vs 53.1 prelim
- Germany November final services PMI 53.3 vs 53.3 prelim
- France November final services PMI 55.1 vs 55.0 prelim
- Italy November services PMI 50.3 vs 49.3 expected
- Spain November services PMI 54.0 vs 53.7 expected
- China says hopes both sides speed up trade talks, reach consensus
- BOJ's Wakatabe: Risks to Japan's economic outlook tilting towards the downside
Markets:
- GBP leads, AUD lags on the day
- European equities mostly lower; DAX down 0.8%
- US markets closed today
- Gold down 0.10% to $1,237.17
- WTI down 0.51% to $52.97
- Bitcoin down 0.73% to $3,868
It was a rather quiet session overall with US markets closed leaving for little direction for traders to act upon, particularly after Treasuries were such an important factor in trading sentiment yesterday. The dollar was mildly bid in Asian trading while the aussie was weighed down by a poor Q3 GDP report.
That carried into European trading where equities were mostly playing catch up to the massacre suffered in Wall St overnight. But as the session moved along, the pound surged ahead of the rest of the major bloc as the greenback pared some of its earlier gains at the same time.
GBP/USD rose to 1.2740 from 1.2690 levels as the quid pushed forward on the day. There are talks that the beat down suffered by May yesterday could lead to a softer Brexit deal prevailing so that could be one of the reasons why the pound is gaining some ground but I would expect the key focus to remain on the vote next Tuesday and that will still enable rally sellers a good reason to keep the theme over the past two weeks going.
We then had an abysmal UK services PMI report and that nudged cable lower to 1.2715 but the pair quickly bounced to 1.2740 again before racing to a high of 1.2798 later in the session. The government then published the full legal text and it doesn't paint a pretty picture for May as this looks to be the nail in the coffin for her at this point. Cable now retreats back to 1.2760 levels on the day.
Aside from that, the euro also got a minor lift as ECB policymakers are said to be discussing measures to withdraw stimulus next year already. EUR/USD traded around 1.1330-40 for the most part before pushing to a high of 1.1358 where it trades just under currently.
Other major currencies remains in a tight range on the day with little action seen across the board. AUD/USD continues to lag as it started the session around 0.7280 levels and is now trading around 0.7300 ahead of North American trading. The aussie's sluggishness owes much to the Q3 GDP report earlier which disappointed expectations and worries are beginning to grow about the RBA being able to hike rates next year.
As a reminder for the session ahead, US markets are closed so there is little for markets to act upon aside from reacting to headlines. Be on the look out for more to come in the Brexit debate in parliament but also possibly more trade comments to come from the US as well.
