Forex news from the European trading session - 18 July 2018
Headlines:
- UK inflation slowdown is a tell of two tales
- Eurozone May construction output +0.3% vs +1.8% m/m prior
- Eurozone June final CPI +0.1% vs +0.1% m/m expected
- UK June CPI 0.0% vs +0.2% m/m expected
- China says trade war has become the biggest 'confidence killer' for the global economy
- Ireland's Coveney says real Brexit negotiations cannot begin while Britain continues to negotiate with itself
- Offshore yuan weakens to near-twelve months low against the dollar
- The dollar is moving towards yet another key test again
- Australian economy expected to grow by 2.9% in 2018 - poll
Markets:
- USD leads, GBP lags on the day
- European equities mostly higher
- Gold down 0.38% to $1,222.88
- WTI crude down 0.73% to $67.58
- US 10-year yields down 0.4 bps to 2.856%
- Bitcoin up 0.94% to $7,383
Besides the headline, the trading session was dominated by the US dollar strength today. The greenback inched higher at the start of trading moving towards the key resistance region once again, before extending gains before European markets opened. The move higher also saw the Chinese yuan tumble to a 12-months low against the dollar.
Equities started the session positively and remained that way throughout, and the dollar index stretched its gains further moving upwards to sit inside the key resistance region highlighted between 95.15 to 95.53.
It was a rather straightforward session of dollar strength and then the UK inflation report hit. Cable was sitting around 1.3080 levels prior to the report, but then fell to a low of 1.3010 thereafter as inflation slowed more than what the market was expecting. That shouldn't derail a rate hike in August by the BOE but it does give some food for thought in the meantime.
The dollar continued to flex its muscles in the aftermath, but eventually backed off after the dollar index touched a high of 95.40 ahead of US trading.
Looking at individual currency pairs, EUR/USD was heavily tied to the dollar's movement and sterling's fall after the inflation report as well. The pair started the session around 1.1640 levels before falling to lows near 1.1620-30 and subsequently got taken down to a low of 1.1607 after the UK inflation report was released. But it subsequently made its way back towards 1.1610-20 levels right now with large expiries seen around these levels.
USD/JPY had a bit more of a subdued session trading around the 113.00 handle for the most part. The pair rose to a high of 113.14 as the dollar gained but is now trading just under the figure level as Treasury yields come off a little ahead of US trading.
GBP/USD was the pair that saw the most action, with the pair starting the session around 1.3100 levels before falling to a low of 1.3070 and then steadying around 1.3080 levels ahead of the inflation report release. The soggy report saw the pair fall to a low of 1.3010 before bouncing back up to 1.3050 and is back down now trading around 1.3020-30 levels.
Commodity currencies saw more straightforward trading with constant weakness seen throughout with moves heavily tied to the dollar's ups and downs. The notable change in the last hour has been the swissie which pared losses against the dollar, after EUR/CHF accelerated losses following a break of the 200-hour MA. That is now taking USD/CHF towards a test of a break of the 100-hour MA as well.
