Forex news from the European morning session - 9 January 2019
Headlines:
- US MBA mortgage applications w.e. 4 January +23.5% vs -8.5% prior
- US and China said to plan release of trade message at the same time tomorrow morning
- Fed's Bullard: Rates are in the right place, no more hikes are warranted
- PBOC's Yi says to implement prudent monetary policy
- The troubling signs in China's economy continue to grow
- US-China trade talks said to have concluded on an optimistic note
- DUP's Wilson says proposals on Irish backstop are "fairly meaningless"
- Switzerland December CPI -0.3% vs -0.2% m/m expected
- Germany November trade balance €20.5 billion vs €18.6 billion expected
- Italy proves that they are the masters of the bailout again
Markets:
- NZD leads, JPY lags on the day
- European equities higher; E-minis up 0.2%
- US 10-year yields up 0.5 bps to 2.733%
- Gold down 0.3% to $1,281.10
- WTI up 2.1% to $50.84
- Bitcoin up 0.1% to $4,006
The session started off with a more risk-on mood in the currencies space and that sentiment pretty much prevailed through as markets continue to be hopeful of a positive outcome from US-China trade talks. The dollar and yen began on the back foot and stayed that way throughout as risk currencies moved higher with the euro and pound also fluctuating a little.
GBP/USD raced to a high of 1.2777 during the European morning but those gains remain capped as Brexit sentiment continues to weigh on the pound. The pair then fell back to hit a low of 1.2715 before nearing 1.2730 levels currently.
Meanwhile, EUR/USD continues to be trapped in a range with downside levels limited by the key hourly moving averages while upside is capped by resistance levels from the 100-day MA and the 1.1500 handle. The pair ranged between 1.1450-70 levels throughout the session.
As risk sentiment remains buoyant, oil is one of the major beneficiaries rising back above $50. That helped give the loonie a lift with USD/CAD falling to a low of 1.3224 early on and continues to trade on the lower side ahead of the Bank of Canada meeting decision later.
The kiwi is the best performing major currency on the day as it rallies on improved risk sentiment with NZD/USD steadily moving higher from 0.6750 levels to 0.6770 levels currently, holding near the highs ahead of US trading.
There wasn't much movement across on the crosses (other than the pound see-saw) as the yen stayed weaker throughout the European session. USD/JPY barely budged and traded between 108.70-90 for the most part.
Looking ahead, the focus will be on risk and whether or not markets can keep up the optimism of trade talks even as there are growing signs of China's troubled economy with car sales slumping to its first annual decline in more than two decades. Aside from that, watch out for Fedspeak and also the Bank of Canada decision (and Poloz's presser too) for added catalysts to market movements today.
