Forex news from the European trading session - 2 January 2019
Headlines:
- China central bank magazine says economic growth may fall below 6.5% in Q4 2018
- The argument for a Fed rate cut rages on as yet another market indicator drops a hint
- UK's Hunt says Theresa May will find a way to get Brexit deal through parliament
- UK December manufacturing PMI 54.2 vs 52.5 expected
- Eurozone December final manufacturing PMI 51.4 vs 51.4 prelim
- Germany December final manufacturing PMI 51.5 vs 51.5 prelim
- France December final manufacturing PMI 49.7 vs 49.7 prelim
- Italy December manufacturing PMI 49.2 vs 48.4 expected
- Spain December manufacturing PMI 51.1 vs 52.4 expected
- Reminder: US shutdown continues as Congress set to reconvene later today
Markets:
- JPY leads, GBP lags on the day
- European equities lower; E-minis down 1.1% on the day
- US 10-year yields down 3.5 bps to 2.648%
- Gold up 0.61% to $1,284.97
- WTI down 0.81% to $45.04
- Bitcoin up 2.18% to $3,801
Markets started off with a mild risk-off mood as Chinese economic data disappointed in Asian trading and that set loose the narrative of worries about global economic growth experiencing a further slowdown this year. Equities fell alongside risk assets and in the currencies space, the aussie and kiwi were the biggest losers while the yen gained.
USD/JPY started the session around 109.30 before moving to hit a seven-month low of 109.18 as the dollar struggled in the early stages before European markets opened. The pair then tracked lower to a low of 108.71 as equities sentiment eroded with E-minis falling by more than 2% at one point. But as equities recovered from the lows, the pair also tracks higher to 109.10-20 levels currently.
There was more volatile movement in the euro and pound with both currencies advancing early on against the greenback. EUR/USD and GBP/USD touched a high of 1.1497 and 1.2773 respectively before reversing course as risk sentiment soured and the dollar caught a bid as a result. The latter narrative continued to play out and now both pairs are trading close to the lows against the dollar with EUR/USD near 1.1400 and GBP/USD at 1.2650 levels.
Although the aussie and kiwi didn't make new lows for the session, both currencies were very much offered as risk sentiment failed to recover since Asian trading. AUD/USD ranged between 0.7005 to 0.7020 for the most part while NZD/USD saw similar price action between 0.6890 and 0.6915.
There was also decent action in USD/CAD with the pair hitting a low of 1.3569 as the loonie advanced against the greenback early on and price breaking the 200-hour MA. However, as the dollar recouped losses the pair reversed course to trade at 1.3640 levels now.
Risk remains the name of the game ahead of North American trading so expect equities to take center stage in driving directional flows across markets later on. As mentioned earlier, be wary of any potential dead cat bounces and headlines pertaining to the US-China trade rhetoric as that could cause for sudden changes across risk assets.
