Forex news from the European trading session - 7 September 2018
Headlines:
- Eurozone Q2 final GDP +0.4% vs +0.4% q/q prelim
- BOE/TNS August inflation expectations 3.0% vs 2.9% prior
- China end-August FX reserves $3.110 trillion vs $3.115 trillion expected
- UK August Halifax house price index +0.1% vs +0.1% m/m expected
- Italy's Tria reiterates that country will respect EU rules
- France July trade balance -€3.49 billion vs -€5.74 billion expected
- France July industrial production +0.7% vs +0.2% m/m expected
- Germany July industrial production -1.1% vs +0.2% m/m expected
- Germany July trade balance €16.5 billion vs €19.5 billion expected
- Switzerland August unemployment rate 2.4% vs 2.4% expected
- Japan July preliminary leading indicator index 103.5 vs 103.5 expected
- Japan's Aso says no comment regarding Trump remarks on US-Japan trade
Markets:
- GBP leads, AUD lags on the day
- European equities lower, FTSE leads losses
- Gold up 0.18% to $1,202.23
- WTI up 0.24% to $67.93
- US 10-year yields up 1.3 bps to 2.886%
- Bitcoin down 1.43% to $6,349
The session started off with the yen leading gains after Trump is reported to be targeting Japan next in the trade rhetoric. USD/JPY traded around 110.55 to begin with and steadily moved higher throughout the session as yields crept higher too.
There was a bit of choppiness in EUR/USD and GBP/USD to begin with as well with both pairs moving to session lows before trading back up to session highs at the time. EUR/USD fell a little as the dollar caught a bid to a low of 1.1614 before reversing and moving back up to 1.1642. GBP/USD saw a similar move from 1.2914 to 1.2948.
Things held steady for the the rest of the session as the pound and euro retreated a little after those gains. Cable traded back around 1.2930 levels before a quick bid sent the pair up to a high of 1.2969 on the day. Thereafter, the pound ripped higher again with cable surging past 1.3000 to a high of 1.3028 on the day as Barnier's comments from an interview transcript started hitting the wires.
I'm still not convinced of any change in stance by Barnier and the EU from those comments but there is a hint of softening, though the key bottleneck point remains and that is the Irish border. But pound traders have been looking for a good headline to chew on since the spike on Wednesday, and they got their due reward for persistence I would say as cable has been maintaining a near-term bullish bias since yesterday.
Other currency pairs offered less excitement with minor declines seen in USD/CAD, AUD/USD and NZD/USD. USD/CAD has been trading lower as hopes of a NAFTA deal continue to underpin the loonie while AUD/USD is weighed down further as trade tensions linger in the market. The pair fell to a low of 0.7138 early in the session as the dollar was bid then but then traded between 0.7150 to 0.7170 for majority of the session.
NZD/USD traded very much similarly to the AUD/USD and moved to a low of 0.6561 when the dollar was bid early on before trading around 0.6570 to 0.6590 for the remainder of the session.
Looking ahead, we'll have the US non-farm payrolls due at 1230 GMT to add some spice into the market but also, there's still the possibility that Trump may announce tariffs against Chinese goods - which is what has been keeping markets on edge over the last two days. But as highlighted earlier, markets have been quick to fade these trade headlines and if there is no imminent announcement, we may see risk assets start to party a little ahead of the weekend.
