Forex news from the European trading session - 16 May 2018
Economic data:
- Japan March final industrial production +1.4% vs +1.2% m/m prelim
- Germany April final CPI 0.0% vs 0.0% m/m prelim
- Italy March industrial orders +0.5% vs -0.6% m/m prior
- Italy April final CPI +0.1% vs +0.1% m/m prelim
- Eurozone April final CPI +1.2% vs +1.2% y/y prelim
Headlines:
- OPEC's Barkindo says oil output cuts compliance was a record in April
- Turkish central bank governor to hold talks with Erdogan - report
- Lega's Salvini says he does not insist on premiership
- CBRT says closely monitoring "unhealthy" price formations in the market
- Government deal in Italy to be reached today - report
- BOE May agents' survey: Consumer spending slowed markedly, in part due to weather
- Iran says will not surrender to US pressures, sanctions, even threats of war
- IEA cuts 2018 oil demand growth forecast due to rising prices
- Italy's Lega says request for cancellation of €250 bn debt not in official government draft
- Germany's Merkel says that it is not right to end Iran deal now
- Iran says US sanctions are intended to derail efforts to save nuclear deal
- Euro exit said to no longer be in Five-Star, Lega talks - report
- Riksbank's Skingsley says forecast is that rate will be raised this year
- Chinese official says US trade demands don't make sense
- ECB's Constancio says growth slowdown is not a serious matter
- Di Maio and Salvini could take turns as Italian premiers - report
Markets:
- NZD leads, EUR lags on the day
- European equities mostly lower, Italy's FTSE MIB down 1.8%
- Gold up by 0.08% to $1,291.55
- WTI down by 0.15% to $71.20
- US 10-year yields down by 1.3 bps to 3.059%
- Bitcoin down by 1.77% to $8,368
It was a lively session with headlines mainly dominated by Italian politics and the messy situation in Turkey. The dollar started the day a little lower against the major bloc, retracing some overnight gains. But while that still holds true for most of the major currencies, the same can't be said for the euro and sterling.
The former in particular accelerated losses as head into European mid-day with EUR/USD testing 1.1800 before the figure level eventually gave way. It is the first time since 19 December that the pair has touched below 1.1800.
Sterling meanwhile is failing to take advantage of the dollar's brief pause today with cable unable to stay above 1.3500 for the most part and now trades near the lows at 1.3474.
After the breakout in yields yesterday, we're seeing a bit of a breather as 10-year yields in the US stuck between 3.06% to 3.07% so far today - failing to see an extension. And that is helping to keep the dollar rally on hold, with USD/JPY trading mildly lower at 110.10 levels for the time being.
Italian politics are making a comeback again, with Lega and Five Star Movement on the verge of forming a government. But yesterday's reported request for the ECB to write-off the €250 bn debt seems to be unsure at the moment and Italian bonds are also sent for a topsy turvy spin on the day.
But yields are now higher, with the 10-year yields set for its biggest daily jump since July last year. Italian stocks on the other hand are more nervous about the situation with the FTSE MIB down by 1.8% on the day - led by banking stocks.
Lastly, the Turkish lira was one of the more exciting currencies to watch today. The currency fell to a record low above 4.50 against the dollar early on, before the CBRT stepped in with a statement to help push up the lira a little. That is followed by a report that the CBRT governor will hold talks with Turkish president Erdogan - and that resulted in a second wave of USD/TRY position covering.
Since then, the lira is still moving in volatile fashion trading between 4.4100 and 4.4400 against the dollar.
