Forexlive Americas FX news wrap: UK/Irish talks hijack the US/China talks
Forex news for near trading on October 10, 2019
- US stocks close higher but off session highs
- US China Businesss Council: US/China trade deal is going to be smaller than hoped
- Brexit: NI would leave the customs union, but "follow" EU customs rules.
- Britain is proposing a pared down free-trade agreement to end Brexit stalemate
- US auctions off 30 year bond at 2.170% vs WI level of 2.169%
- Fed's Kashkari: Thinks US economy is going to grow but faces risks
- European shares ended the session higher on the day
- Irish PM Varadkar: Meeting with PM Johnson was positive and promising
- Irish Independent: Good progress made on trade issues
- Headline news sends the GBPUSD racing higher. Decision time.
- Johnson and Varadkar say they could see pathway to possible deal
- The market is saying that a partial deal is good enough as Trump teases deal
- Trump repeats warning of sanctions against Turkey "if they don't play by the rules"
- China vice premier Li: Willing to cooperate with the US on trade balance, market access and investors' protection
- Canada new housing price index for the month of August 0.1% versus -0.1% est.
- US initial jobless claims 210K vs 219K estimate
- US September CPI +1.7% y/y vs +1.8% expected
- The NZD is the strongest and the USD is the weakest in trading today.
- Fed's Kaplan: Market-determined rates showed policy was too tight before rate cuts
- China to ask US to end sanctions on its top shipper in trade talks - report
- ECB: QE was opposed by a number of members, arguing it should be instrument of last resort
In other markets:
- Spot gold is down 11,000 $0.42 or -0.76% at $1494.21
- WTI crude oil futures are higher by $1.13 or 2.15% at $53.72
In the North American and European stock markets today, all the major indices closed higher. A number of the European indices closed at session highs. The US indices reached up 1% and backed off. The S&P index was this biggest gainer at +0.64%.
In the US debt market today, yields move higher on the back of the exit out of flight to safety trades. The 2 year rose 7.5 basis points. The 10 year rose 8.1 basis points. The yield curve was a little bit higher versus yesterday's close. Today, the US treasury auctioned off 30 year bonds. The demand was about average.
The big news today was supposed to come out of Washington with the US/China talks commencing. There was also CPI data and the weekly initial jobless claims.
The CPI came in a little stronger than expected, but the YoY remains below the 2.0%, but the core inflation ex food and energy remained unchanged at 2.4%. Real average hourly earnings YoY remained somewhat muted at 1.2% versus 1.4% last month.
As far as initial claims, they continue to show a solid jobs market with claims coming in at 210K vs 219K estimate.
The US/China trade talks were preempted by overnight headlines that sent markets up and down. At first, there were concerns that China would cut short the meetings. That was later denied. The markets settled in and took a more wait-and-see attitude vs speculation although there was rumblings that a deal might be made, but it would be a more watered-down start.
If by tomorrow the sides can agree on some concessions whether it be purchases from China, and delay of future tariffs by the US, it would be a step forward. To knock off the USTR Peter Navarro's "7 Deadly Sins", would be unrealistic at this point.
Although all that was happening, the real market moving news in the forex came out of the talks between Irish PM Varadkar and UK PM Johnson. Headlines that the two leaders could see a pathway to a possible deal, sent the GBP sharply higher. The GBP is ending the day as the runaway strongest currency of the day. The JPY was the weakest as traders exited the "relatively safety" of the JPY. The CHF and the USD were also sold on the same general flows.
Some price action for the major currency pairs saw:
- The GBPUSD move up about 250 pips by the time the rally had reached it's peek (from the NY session low). In the process, the pair spiked above its 100 and 200 hour MAs, a topside trend line, 50% retracement of the move down from the September high, and 100 day MA at 1.2406. The pair is closing above its 100 day MA for the first time since September 24. The high reached all the way up to 1.2472 (from a NY session low of 1.2215) before retracing into the close a bit to 1.2438. Going forward, the 100 day moving average near the 1.2400 level, will be the risk level for longs. Stay above keeps the buyers in firm control.
- The USDJPY based in the early New York session at the 200 hour moving average at 107.336 and started to run higher. The pair moved above its 100 day moving average at 107.519 and put some room between it and the price. The hghi for the day reach 108.01 and is closing around 107.94. A move back above the 108 level would give the buyers another bullish step. The high prices for September and early October peaked at the 108.46/47 area. That ceiling should be a tough nut to crack on increased upside momentum. Close risk in the new day comes at the 107.70-74 area. Below that, the 100 day moving average at 107.519 will be another key barometer for both the bulls and bears.
- The EURUSD was able to breach the 1.1000 ceiling defined by swing highs from last week and earlier this week. In doing so the price extended up to the 1.1033 level on the buying momentum. However, that momentum move started to falter and the price move back toward the break point at the 1.1000 level into the close for the day. In the new day, the 1.1000 level is the key barometer. Stay above, keeps the bulls in control. Move back below and the risk is the buyers today, lose some of their confidence (with the potential for a rotation back toward the 100 hour moving average at 1.0981.
- The USDCAD fell below its 200 hour moving average at 1.3296 and 200 day moving average at 1.3286 to a low of 1.3268. However, the afternoon rally saw the price retraced back to the 200 hour MA before finding sellers once again. As the market closes, the pair is back down testing its 200 day moving average at 1.3286. Move below and the sellers can feel more confident.
- The NZDUSD and AUDUSD were already higher on the day as the North American traders entered, and spend the session testing the 100 hour moving averages and finding support buyers (for the AUDUSD the 100 hour MA is at 0.67429 and for the NZDUSD it is at 0.63064). Each are closing above those moving averages but off the highs for the day too.
That's it for me today. For the Asian Pacific traders who will be starting their weekend, thank you for your support. Wishing you all a happy and healthy weekend.