Forex news from the European trading session - 25 April 2018
Economic data:
- Japan February all industry activity index m/m +0.4% vs +0.5% expected
- Switzerland April Credit Suisse investor sentiment 7.2 vs 16.7 prior
- France April consumer confidence 101 vs 100 expected
Government/Central banks:
- Germany's Altmaier says US metal tariffs wouldn't impact 2018 German GDP
- German government lowers 2018 GDP growth forecast
- ECB says Mersch's comments earlier were from a month ago
- UK's Davis: No one sees Irish backstop as a desirable outcome
- Russia questions Trump's stance on Iran nuclear deal
- PBOC reiterates that prudent, neutral monetary policy will remain unchanged
- More from Davis: Massively higher probability that there will be a Brexit deal
- UK's Davis says motion of Brexit deal will be amendable
- ECB's Vasiliauskas: Time is approaching to consider transition from QE
- ECB's Mersch: Confidence on inflation has recently risen
- EU's Mogherini says Iran nuclear deal is working and needs to be preserved
Markets:
- USD leads, NZD lags on the day
- European equities lower, DAX leads losses - down by 1.5%
- Gold down by 0.47% to $1,324.19
- WTI up by 0.13% to $67.79
- US 10-year yields up by 1.7 bps to 3.017%
- Bitcoin down by 3.3% to $9,135
The breakout story on the day is that of US 10-year yields. It broke above 3% in Asian trading before falling back, but at the start of European trading it made a second attempt to break above the elusive barrier with the spike up to 3.01% at the time.
The US dollar was already holding its own prior to the start of the session but climbed further on the day to session highs after receiving a boost from the spike in Treasury yields.
Despite 10-year yields climbing to a high near 3.03%, it failed to inspire further gains in the dollar as the greenback lost some ground heading towards the end of the session. The movement in the dollar has been the real story so far in the currency market as it is not every day that you get to see EUR/USD and GBP/USD having larger ranges than EUR/JPY and GBP/JPY respectively.
EUR/USD started the session hugging key technical levels before falling to a low of 1.2187 on the day as the dollar surged higher. But the pair has since retraced some losses and continues to hug the support levels highlighted here. Also, take note that we have large option expiries in the pair for today and tomorrow at 1.2220 and 1.2200 respectively so as mentioned many times during the day, that will play a part in keeping price action sticky ahead of the ECB meeting.
Trading in cable was more straightforward today as it is a reflection of the dollar's strength. Cable moved to lows of 1.3934 as the dollar gained traction and accelerated gains on the day, before ultimately retracing to 1.3960 levels as the dollar gave up some of its earlier gains.
USD/JPY was more of a trade on yields than anything else today. As yields broke higher, so did the pair and it jumped to highs of 109.27 despite the fact that equities were faring poorer on the day. But as the dollar gave back some of its gains the pair also fell a little but doesn't sit that far off the highs.
As for commodity currencies, they are the major laggards along with the swissie on the day. The AUD and NZD were already weak heading into European trading and accelerated losses against the dollar as technical levels for both pairs (here and here) suggest further downside is to come.
The swissie meanwhile was in the middle of the pack mostly but extended losses late in the session as EUR/CHF moves back towards the 1.2000 handle once again, touching a high of 1.1997 moments ago.
