Forex news from the European morning session - 20 December 2018
Headlines:
- Bank of England leaves bank rate unchanged at 0.75%; votes 0-0-9
- UK parliament to begin debate on May's Brexit deal on 9 January
- UK CBI December retailing reported sales -13 vs 15 expected
- US report on auto tariffs said to be delayed until mid-January
- UK November retail sales +1.4% vs +0.3% m/m expected
- Fast food economics: GBP -23% undervalued against the USD
- Riksbank raises key interest rate to -0.25% from -0.50%
- China says that there are plans to hold further trade talks with US
- BOJ's Kuroda: No problem if yields should fall into negative range
- BOJ's Kuroda: Judges that risks are tilted to the downside
Markets:
- EUR leads, USD lags on the day
- European equities trade lower but off the lows; E-minis up 0.2%
- US 10-year yields up 1.8 bps to 2.773%
- Gold up 0.96% to $1,255.01
- WTI down 2.99% to $46.73
- Bitcoin up 9.86% to $4,030
The session started off with risk currencies on the receiving end of a beating while the yen soared as equities sentiment remained sour following the Fed decision yesterday. USD/JPY broke below 112.00 early on as the Nikkei slumped to its lowest daily close since October last year and the Topix entered into a bear market.
But as the session progressed, the focus started turning towards broad dollar weakness and that saw the greenback fall and then fall even more against the rest of the major currencies bloc. EUR/USD started the session a little higher near 1.1400 and then ran up to 1.1430 before a fresh round of dollar weakness mid-way through the session saw the pair race to a high of 1.1486 before settling around 1.1460 levels currently.
GBP/USD also benefited from that as it moved from 1.2620 levels to a high of 1.2707 as the pound capitalised on dollar weakness and upbeat retail sales report, before hovering around 1.2670-80 currently.
With the dollar collapsing, it helped to see improved sentiment in US equity futures as E-minis pared losses of 1.1% earlier to be up by 0.2% now ahead of the opening bell. However, sentiment remains fragile and there isn't much perceptive change in the yen or risk currencies as the latter are still lagging, with exception against the dollar that is.
NZD/USD started the session around 0.6730 levels before moving back up to 0.6760 as the dollar slipped. The kiwi was dragged down by weaker risk sentiment and a poor Q3 GDP report earlier in Asian trading. The pair then raced to a high of 0.6791 before settling just under there now ahead of US trading.
Meanwhile, USD/JPY continued its track lower following the break of the 112.00 level as the pair pushed lower as the dollar remains weak in trading today. Of note, the pair looks set for a break of the 100-day moving average for the first time since April.
Aside from that, oil continues to slip and that is not helping the loonie gather bids this week. And gold is also up by nearly 1% on the day, looking to break above the 200-day moving average for the first time since May.
Right now, currencies have appeared to settle on the narrative that the Fed is moving to be more dovish; hence the dollar selloff. However, equities sentiment will remain a little tricky as investors will have to weigh between a dovish Fed - good for risk - and the Fed possibly making a mistake and causing more headwinds for the economy - bad for risk.
