Forex news from the European morning session - 22 November 2018
Headlines:
- EU's Tusk says future relationship deal is "agreed in principle", subject to leaders' endorsement
- A couple of details on the agreed Brexit draft text
- EU and UK negotiators said to have agreed on draft text of future ties post-Brexit
- Moscovici says convinced that a budget agreement can be reached with Italy
- Switzerland Q3 industrial output WDA +1.4% vs +6.2% y/y expected
- Italy's Salvini: Will not backtrack on budget law
- France November business confidence 104 vs 104 expected
- BOJ's Kuroda: Japan's economy is clearly recovering
- China says very concerned about US report on IP theft
Markets:
- GBP leads, NZD lags on the day
- European equities mixed, mostly lower
- Gold up 0.18% to $1,228.21
- WTI down 0.68% to $54.25
- Bitcoin flat at $4,450
- US markets closed in observance of Thanksgiving
It's never a dull day when you have Brexit and Italy hogging the headlines, eh? Today, the former takes precedence and as a result, the pound is the biggest mover as it gains against the rest of the major currencies bloc. EU and UK negotiators reached an agreement on future ties post-Brexit and the headline saw the pound shoot for the stars, albeit mostly led by algo reactions as it would seem.
GBP/USD moved up from 1.2790 to 1.2820 and in a few minutes it jumped to a high of 1.2927. The draft text had some positive items for the UK but in terms of the key sticking points, essentially nothing has changed. Once that was made clear by the EU, stops were taken out as cable plunged down to 1.2792 from close to 1.2880 in a matter of seconds before recovering back to 1.2860-70 levels where it trades currently.
The agreement here now puts the ball in the EU27 member states' court as they will have to approve the text to proceed with the summit on Sunday. However, lingering issues such as fishing, Gibraltar, and the Irish backstop could potentially make things tricky as we head into the weekend.
Aside from that, thin liquidity prevailed for the most part with most major currencies seen ranging. The yen did catch a bit of a bid mid-way through the session as risk assets tumbled in quick fashion. Oil slipped by more than 1% as E-minis also dipped heavily. There weren't any headlines to have caused the move and most of the drop in risk there has been retraced since.
USD/JPY fell from 113.05 to 112.90 on the back of that and now trades close to the 113.00 handle ahead of North American trading.
EUR/USD moved higher on the day in spite of Italy's refusal to change their budget stance, with the euro getting a bit of a lift from the pound's advance. The pair started the session around 1.1400 before moving up to a high of 1.1434 and then settling at 1.1410 currently.
The NZD is the biggest laggard on the day as the kiwi and aussie suffered due to a fall in short-term yields. NZD/USD started the session around 0.6800 before moving to a low of 0.6789 and then now tracking back to 0.6800 levels ahead of holiday-thin trading in North America.
