Forex news from the European trading session - 6 August 2018
Headlines:
- UK govt spokesman says May still believes no deal is better than a bad Brexit deal
- Eurozone August Sentix investor confidence 14.7 vs 13.4 expected
- SNB total sight deposits w.e. 3 Aug CHF 575.9 bn vs CHF 576.4 bn prior
- Germany July construction PMI 50.0 vs 53.0 prior
- Italy's Di Maio says respecting fiscal rules is not the priority in the next budget
- ECB's Nowotny says he supports a "faster" normalisation of monetary policy
- More on the poor German industrial orders figures for June earlier
- Fed's Bullard says that waiting for an 'inevitable recession' is wrong
- Germany June factory orders -4.0% vs -0.5% m/m expected
Markets:
- USD leads, GBP lags on the day
- European equities mixed, DAX leads gains
- Gold down 0.31% to $1,209.83
- WTI up 1.40% to $69.45
- US 10-year yields flat at 2.949%
- Bitcoin down 5.73% to $6,965
The session was lacking any notable headlines or data releases but certainly wasn't lacking in terms of action. The dollar was holding up well early on - backed by further gains against the yuan after the PBOC fixed the USD/CNY rate higher after Friday's decision to move its FX forward reserve requirement to 20% from 0%.
That invited the yuan to weaken further on the day and provided some tailwind for the dollar to move higher across the board. But the notable gains in the dollar only came during the last hour of the session, sending the dollar index up by 0.3% on the day.
Apart from that, the rest of the session was dominated by continued sterling weakness. UK trade minister Liam Fox's comments of a no-deal Brexit outcome weighed on sterling for the most part but a break of technical levels in GBP/USD and GBP/JPY isn't really helping to stem declines in sterling as well.
As for cable, put together the two notable events on the session and the result is a drop to lows last seen in September last year. At time of writing, the pair is now at 1.2935 down 0.5% on the day as the dollar advances further on the day.
Looking at other currency pairs, EUR/USD steadily moved lower from 1.1560 levels to 1.1540 before paring losses only to fall again as the dollar catches a bid in the final hour. Currently, the pair trades at the lows of 1.1530.
USD/JPY was more subdued as the pair traded between 111.20-30 levels for the most part, hugging the 200-hour MA. Sellers threatened a break lower but as the dollar got bought up, the pair moved higher as well and now trades near the highs at 111.48.
Commodity currencies in general were the more quieter ones when put in comparison against the greenback. USD/CAD hovered around the 1.3000 level for the most part as oil prices pushed higher but the dollar's overwhelming strength sees the pair now trade at the highs near 1.3020.
There was very much similar price action in AUD/USD and NZD/USD as both pairs traded lower initially against the dollar only to pare those losses before moving back to the lows seen now at 0.7385 and 0.6733 respectively.
As for the dollar index itself, it looks like buyers are looking to bid it towards a test of the 95.50 levels once again. But the key in that test would be to hold a daily close above it, so let's see what the US trading session will bring later.
