Forex news from the European morning session - 23 January 2019
Headlines:
- US MBA mortgage applications w.e. 18 January -2.7% vs +13.5% prior
- UK January CBI trends total orders -1 vs 5 expected
- Labour said to be "highly likely" to back Cooper amendment aimed at stopping no-deal Brexit
- France January business confidence 102 vs 103 expected
- BOJ's Kuroda: Vital to achieve inflation target first, then normalise policy
- BOJ's Kuroda: Expects negative impact of sales tax hike to be limited
- BOJ's Kuroda: Central bank will take additional measures if needed
- BOJ's Kuroda: Oil drop is key reason for downgrades in price outlook
Markets:
- GBP leads, JPY lags on the day
- European equities mostly higher; E-minis up 0.5%
- US 10-year yields up 2.5 bps to 2.764%
- Gold flat at $1,285.08
- WTI up 1% to $53.54
- Bitcoin flat at $3,573
The pound was the standout performer in an otherwise quiet session for the most part as markets chose to focus on the quid after reports of further support for parliament in preventing a no-deal Brexit outcome from materialising. Cable posted early gains rising to 1.3000 from 1.2960 earlier before dipping back to 1.2970 quickly after testing the figure handle.
But the pound caught a second wind from reports that Labour will be backing Yvette Cooper's amendment that would allow parliament to come up with their own "Plan B" should Theresa May's Brexit plans go up in smoke. Cable jumped to 1.3020 before stablising above the 1.3000 handle and racing to near session highs close to 1.3040 currently.
Aside from that, it was mostly a risk story as currencies led sentiment across markets. The kiwi, aussie and loonie were among early gainers as the former two gained on the back of a stronger Chinese yuan while the latter gained on a decent move higher in oil.
NZD/USD began the session around 0.6780 levels before racing to a high of 0.6798 and continues to hold up near the highs ahead of US trading. Meanwhile, USD/CAD steadily tracked lower from 1.3330 to a low of 1.3313 as risk/oil continues to stay buoyed with Canadian retail sales in focus later on.
The yen is the weakest performer on the day after the BOJ moved to cut its inflation forecast earlier in Asian trading. USD/JPY started the session around 109.65 before Kuroda began his press conference and the pair barely budged thereafter. The pair then ranged between 109.50-70 during the session. Rather mundane, indeed.
Looking ahead, the baton will now be passed to US traders to see if risk/equities sentiment will be taken to view as the glass half-empty or the glass half-full; given that the US-China trade rhetoric has gone quiet since overnight headlines. Currently, markets are leaning more towards the latter but things can quickly change on the back of one headline so just be wary of that and be mindful not to get too greedy in your trades.
