Forex news from the European morning session - 9 September 2019
Headlines:
- Brexit: UK parliament will be prorogued at the close of business today
- BOE's Vlieghe: Interest rates likely to stay lower for years
- UK PM Johnson: We have "an abundance" of proposals to break Brexit impasse
- Ireland's Varadkar: If there is a good reason for Brexit extension, we would consider it
- Ireland's Varadkar: Have not received workable alternatives to the backstop yet
- New Saudi oil minister says no radical change in oil policy
- UK July GDP +0.3% vs +0.1% m/m expected
- SNB total sight deposits w.e. 6 September CHF 591.6 bn vs CHF 591.6 bn prior
- Brexit: Government may face legal complications if they don't play ball on extension
- Germany July trade balance €21.4 billion vs €17.4 billion expected
Markets:
- GBP leads, CHF lags on the day
- European equities mixed; E-minis up 0.2%
- US 10-year yields up 3.4 bps to 1.594%
- Gold up 0.3% to $1,511.64
- WTI up 0.4% to $56.74
- Bitcoin up 0.8% to $10,435
The pound is the main mover as we begin the new week as the currency jumps amid more short covering after July GDP data beat out expectations, relieving fears of a technical recession in the UK economy this year.
Cable initially made lows of 1.2234 in the early morning before recovering to 1.2290 and then shooting past the 1.2300 handle after the data release. Gains continued to flow into the pound during the morning and that saw cable run to a high of 1.2385 at one point.
However, the gains seen here remain suspect in my view as hopes of a Brexit deal remain distant and European officials are still not keen on the idea of extending Article 50 without any firm reasoning or solution to the current impasse.
Meanwhile, the likes of the aussie and kiwi stayed firm as both currencies picked up from where they left off last week. AUD/USD hit fresh six-week highs as price holds near 0.6870 as we move towards North American trading.
Treasury yields moved higher during the session as well, prompting USD/JPY to stay underpinned close to 107.00 from 106.85 to start the morning. But the dollar itself is more subdued, displaying slightly softer sentiment across the board.
Looking ahead, markets are off to a bit of a decent start to the week but offering little of anything new so far. The pound's breakout may be one to watch but I would be a bit wary of how sustainable the gains in the currency will be amid ongoing Brexit uncertainty.
The focus will stay on trade and Brexit as we slowly turn the major focus towards the central bank bonanza (ECB, Fed, BOJ, SNB, BOE) over the next 10 days.
