Forex news from the European trading session - 8 October 2018
Headlines:
- Fed's Bullard: We have entered lower end of neutral rate estimates
- ECB's Knot says will start discussing timing of interest rate moves in January
- UK PM spokesman says there remain big issues to be resolved with EU on Brexit
- Iran's oil minister says sees severe shortage of oil in the coming months
- Fed's Bullard says that US growth surprise allowed for rate hikes
- Italy's Salvini says that Juncker and Moscovici are the real enemies of Europe
- Eurozone October Sentix investor confidence 11.4 vs 11.6 expected
- SNB total sight deposits w.e. 5 October 2018 CHF 577.5 bn vs CHF 577.9 bn prior
- Italy's Salvini reiterates that exit from the euro is not on the agenda
- Bank of France September industry sentiment indicator 105 vs 102 expected
- Pompeo says US has a fundamental disagreement and great concern about China's actions
- Germany August industrial production -0.3% vs +0.3% m/m expected
- Switzerland September unemployment rate 2.4% vs 2.4% expected
- Pompeo: Made significant progress in denuclearisation talks with North Korea
Markets:
- JPY leads, GBP lags behind
- European equities lower, Italy leads losses
- Treasuries market closed for today
- Gold down 0.77% to $1,193.72
- WTI down 1.40% to $73.25
- Bitcoin up 0.62% to $6,579
It's a bit of an odd session in markets as risk off sentiment arising from weaker equities allowed the Japanese yen to lead the way but the next two best performers are actually the Australian and New Zealand dollar. Meanwhile, the pound was weighed lower by more Brexit rhetoric once again.
The session started off slowly as Japanese markets are closed today but the start of European trading saw the dollar gain some traction across the board and that was followed by a further move in the yen as Italy's bond market sold off once again. EUR/USD started the session around 1.1515 before falling to test the 1.1500 level. But as Italy continued to weigh on markets during the session, the pair fell to a low of 1.1465 before trading close to 1.1480 currently.
Italy's woes exacerbated further declines in equities and that also weighed on risk assets as oil was not spared from losses today as well. Brent is down by 1.5% currently and the weaker performance in oil has been a factor dragging down the loonie today. USD/CAD started the session already higher at 1.2975 but steadily moved higher and tested a break of the 1.3000 before trading just below it currently.
The fall in risk assets sparked a bit of a risk off tone in markets and that saw USD/JPY - which was trading steadily around 114.65 to 114.80 prior - to fall quickly to 114.40. As Italy's stock market continued to worsen, the pair fell to a low of 113.25 before trading around 113.35 now.
As for the pound, it was yet another familiar story of taking two steps forward, then one step back. Cable has been trading admirably around 1.3100 at the start of the session but then fell in quick succession towards 1.3070 as the quid fell against the dollar and the yen. The losses continued for the pound as it moved to 1.3040-50 levels before dipping to a low of 1.3028 following uninspired comments on Brexit by UK PM spokesman James Slack. The pair now recovers slightly to 1.3040 as the dollar gives back some gains across the board.
The odd ball in trading today has been the Australian and New Zealand dollar. Both currencies now trade at the highs for the day against the US dollar ahead of a holiday-marred North American trading session. AUD/USD dipped to a low of 0.7041 from 0.7050 levels - where it traded steadily - on the back of some risk off sentiment but now moves back up to highs near 0.7070. NZD/USD saw similar action as it fell to a low of 0.6425 before trading up just above 0.6450 currently.
The session ahead should be a more subdued one as the Treasuries market is closed today. US stocks will still be trading but with banks closed for both US and Canada, liquidity is expected to be thin.
