Forex news from the European morning session - 6 December 2018
Headlines:
- Italy's ruling parties said to only consider deficit target above 2.0%
- Saudi says there is no agreement yet to cut oil production
- RBA's Debelle says will see how data goes for next few months, reassess outlook if need to
- RBA's Debelle: Next move in interest rates more likely to be up than down
- Germany November construction PMI 51.3 vs 49.8 prior
- ECJ ruling on Article 50 case to be on 10 December
- UK PM May: It's my deal, no deal, or no Brexit at all
- OPEC+ cut reportedly unlikely to be larger than 1.4 million bpd
- China says that Canada, US have yet to clarify reason for arrest of Huawei's Meng
- China says very confident of reaching agreement on trade with US in 90-day period
- Germany October factory orders +0.3% vs -0.4% m/m expected
- Italy's Conte reportedly to present budget plan to Juncker next Tuesday
- Italy's Salvini, Di Maio reportedly won't go below 2% on budget deficit target
Markets:
- JPY leads, AUD lags on the day
- European equities lower, DAX down 2.4%; E-minis down 1.6%
- US 10-year yields down 1.8 bps to 2.895%
- Gold down 0.10% to $1,236.08
- WTI down 2.38% to $51.63
- Bitcoin up 1.52% to $3,780
The session began with the focus being on risk as Huawei's CFO (founder's daughter) was arrested in Canada overnight and is to be extradited to the US for trial, leading to concerns about the trade truce struck between Trump and Xi over the weekend. Risk took a beating with E-minis started the session being 1.4% lower with commodity currencies weighed down while the yen was bid.
USD/JPY started around 112.60 levels but quickly worked its way to 112.80 after forming a double bottom at the lows. Then, risk got a bit of a lift with China making some upbeat comments on committing to trade agreements with the US. That saw E-minis pare losses to be down by about 0.7% while USD/JPY made its way back up to 113.10.
However, the upside move was short-lived and risk soured later on in the session with European equities falling sharply - most indices are down by more than 2%. E-minis also decline to be about 1.6% lower now on the day. That sees USD/JPY fall back to 112.80 ahead of US trading.
Commodity currencies were the ones that suffered the most on the back of this. AUD/USD in particular suffered as the aussie was dealt multiple blows from poor risk sentiment, softer trade balance data, and dovish comments by RBA's Debelle. The pair moved to a low of 0.7210 from 0.7220-30 levels earlier following Debelle's comments, before falling to a low of 0.7192 as risk soured again.
Meanwhile, USD/CAD saw a follow through move following the dovish Bank of Canada statement yesterday as the pair raced to its highest levels since June 2017 on the back of sour risk tones and a fall in oil prices. The pair started the session around 1.3400 before moving up to a high of 1.3445 after OPEC members said that they are likely to agree on a 1 million bpd cut in production, which is the bare minimum of market expectations.
Oil fell by more than 4% at one point, threatening a move back towards $50 but the losses have leveled off a little and that sees USD/CAD move back to near 1.3420 currently.
The euro and the pound were less interesting as both currencies remain near flat levels on the day against the dollar with little directional movement on the day as Italy and Brexit headlines offered nothing new.
