Forex news from the European morning session - 15 January 2019
Headlines:
- JP Morgan Q4 earnings report disappoints, trading revenue misses starkly
- Germany's Maas says if Brexit deal is rejected today, there could be new talks with the EU
- Eurozone November trade balance €15.1 billion vs €12.6 billion expected
- DUP's Foster reiterates that party will vote against May's Brexit deal later today
- China moves to issue travel advisory for Canada in tit-for-tat response
- Sterling overnight implied volatility hits 18-month high ahead of Brexit deal vote later today
- Germany 2018 GDP first reading +1.5% vs +1.5% y/y expected
- Germany says Merkel has made no extra assurances on Brexit, refutes report by The Sun earlier
- China December M2 money supply +8.1% vs +8.1% y/y expected
- China says hopes Canada can correct mistakes and immediately release Huawei's Meng
- Quick take on the pound's reaction to the outcome of today's Brexit deal vote
- UK's Parliament predicted to reject May's Brexit deal
Markets:
- CAD leads, CHF lags on the day
- European equities mixed, near session lows; E-minis up 0.1%
- US 10-year yields down 1.8 bps to 2.685%
- Gold flat at $1,291.02
- WTI up 1.1% to $51.08
- Bitcoin down 0.5% to $3,646
It was a session of topsy turvy action as risk sentiment completed its transformation from being more positive to jittery following JP Morgan's disappointing earnings. Meanwhile, the pound also saw plenty of see-saw action as volatility in the currency heightens ahead of the meaningful vote later today.
Risk currencies led the charge early on with AUD/USD holding around 0.7220 before slipping to 0.7200 mid-way through the European morning as risk sentiment was tempered a little. But as JP Morgan's earnings result led the drop in equities, the pair fell to a low of 0.7188 where it trades close to now.
USD/JPY also saw gains erased as a result of fading risk optimism with the pair beginning the session at the highs of 108.75 before slowly erasing those gains to trade near 108.30-40 levels ahead of US trading.
The loonie remains rather resilient with USD/CAD still trading around mid-range today at 1.3270 currently as oil prices remain buoyed despite the latest shift in risk sentiment. Oil is still up by 1.3% on the day currently.
But the currency in focus is the pound and traders are looking to be all over the place ahead of the meaningful vote later today. Cable began the session around 1.2900 before slipping to a low of 1.2829 and then bouncing back to 1.2875 before gyrating around 1.2830-60 levels as Brexit headlines are contradicting one another from all different sources today.
Most news sources are reporting on different stances on things like the Murrison amendment to the margin of May's defeat later (some claiming 60 votes while some are claiming 150 votes). According to them, their sources are "trusted" which is leaving little for traders to go on as there isn't any straight story line ahead of the vote later.
The simplest way to look at this is to just brush aside all the rumours and "sources" talk. There isn't going to be anything that changes significantly ahead of the vote later. All that matters for the pound's direction next will be the margin of May's defeat later and that is something I believe no "source" will be able to predict accurately.
What happens next is still very much up in the air as Labour could table a confidence motion or we could see things just settle down as May angles for a possible second vote on a revised deal.
In the meantime, keep an eye on risk sentiment and US stocks as well. With markets in a jittery mood now, all it takes is just one more negative headline to tip things over the edge.
