Forex news from the European morning session - 8 January 2019
Headlines:
- UK government to propose 15 January as date for meaningful vote on May's Brexit deal
- US-China trade talks in Beijing said to extend into the evening
- Dollar loses some steam ahead of US trading
- Coveney: If UK asks for Article 50 extension, Ireland would not stand in the way
- US December NFIB small business optimism index 104.4 vs 103.0 expected
- Eurozone December final consumer confidence -6.2 vs -6.2 prelim
- Bundesbank says it is looking through volatility in German economic data
- France's Loiseau says there has been no discussion between Macron and May on extending Article 50
- UK December Halifax house prices +2.2% vs +0.5% m/m expected
- UK's Barclay: There would be real difficulties with extending Article 50 process
- UK's Barclay: We are not looking to extend Brexit leave date
- Ireland's Varadkar: EU willing to give written assurances on backstop
- Germany November industrial production -1.9% vs +0.3% m/m expected
- Japan Q3 2018 output gap seen at 1.24% vs 1.60% in Q2 2018
Markets:
- CAD leads, NZD lags on the day
- European equities higher; E-minis up 0.7%
- US 10-year yields flat at 2.694%
- Gold down 0.5% to $1,282.96
- WTI up 1.2% to $49.08
- Bitcoin up 0.7% to $4,033
There wasn't much headlines to materially move markets on the session but there was some decent action to be had regardless. The dollar began on the front foot recouping some losses from overnight trading but has seen majority of its gains wiped out ahead of US trading.
But the star performer on the day so far has been the loonie after we saw a technical break in USD/CAD overnight. The pair started the session around 1.3280 before falling to a low of 1.3268 as steady oil prices also helped with that ahead of the Bank of Canada meeting decision tomorrow. However, the pair has given back some of those gains and now trades near 1.3290.
USD/JPY began the session around 108.70 levels before tracking higher to hit a high of 109.09. But as the dollar pares some of its earlier gains late on, the pair now sits near flat levels close to 108.70.
The notable mover on the session was the pound as it got a lift early on as Irish prime minister Leo Varadkar mentioned that European leaders would offer assurances to the UK on the backstop. That helped lift cable from 1.2760 to a high of 1.2797 before it all came crashing back down as markets realised that such assurances was never going to amount to anything legally-binding. Cable fell back to 1.2745 before ranging between 1.2750-70 levels thereafter.
EUR/USD also saw some minor movement with as the euro fell early on after German factory activity data weakened again, which prompted a comment by the Bundesbank later on. When a central bank comments like that, you know that things are bad. EUR/USD fell to 1.1432 before recovering to 1.1460 as the dollar slipped but now trades back at 1.1440 levels ahead of US trading.
The aussie and kiwi held weaker against the greenback throughout with both pairs trapped in a narrow range but mostly lingering near the lows. Despite equities sentiment turning for the better during the session, both currencies failed to muster a comeback after declines seen in Asian trading.
Looking at the session ahead, markets are still mostly awaiting for US-China trade talks to conclude and hopefully what will be a break of the silence in developments in Beijing over the past two days. Aside from that, focus will still be on the dollar as markets continue to weigh the economic situation in the US along with a more dovish Fed while waiting on Trump's address on Tuesday night about border security/US shutdown.
