Forex news from the European trading session - 27 August 2018
Headlines:
- HKMA steps in to defend the the local currency peg again
- Chinese yuan trades steadily after PBOC support on Friday
- Ifo economist says German export expectations have risen significantly after sharp drop in July
- Ifo says current data signals German Q3 growth of 0.5%
- Germany August Ifo business climate index 103.8 vs 101.8 expected
- SNB total sight deposits w.e. 24 August CHF 576.8 bn vs CHF 576.6 bn prior
- Italy the laggard as European equities open higher
- France's Le Maire says that uncertainties are weighing on global growth
- China says it will steadily push forward opening up of capital markets
Markets:
- JPY leads, CAD lags behind
- European equities all higher, only Italy's MIB is lower
- Gold down 0.10% to $1,204.66
- WTI down 0.36% to $68.47
- US 10-year yields up 0.9 bps to 2.819%
- Bitcoin up 1.43% to $6,706
UK traders are away for the long weekend as it is a bank holiday there and that is making for very light and thin trading in the European session today. With little on the calendar of note, there wasn't much catalysts to have caused heavy market reaction/movement.
The session started off slow with currencies mixed across the board and equities, futures were trading higher. But thereafter, the lira started to come back into the spotlight and that gave reason for the yen and dollar to gather some bids.
However, equities remained in a good mood except for Italian stocks which are weighed down less-than-optimistic prospects of budget talks with the EU in the coming months. That also continued to help widen the spread between BTP yields and their German counterparts.
The session was very much steady after that before a late bunch of offers came in for commodity currencies - but more so for the loonie - and that sent USD/CAD to session highs of 1.3067 on the day. I'm not a big fan of iffy moves like that during thin liquidity and even the probable headline which may have caused it (US trade, WTO-related) isn't even a good excuse in my view.
During this time, the lira continues to weaken against the dollar as well falling to a low of 6.2974 on the day.
Looking at individual currencies, EUR/USD started the session around 1.1620 levels before falling to a low of 1.1595 on the day as the dollar and yen got bid. The pair subsequently stuck around 1.1600-20 and remains in that range currently with large expiries looming at 1.1625.
USD/JPY had a more subdued session after falling during Asian trading. The pair continues to stay in a 111.00-20 range for the majority of the session. Meanwhile, GBP/USD started the session around 1.2850 before falling to a low of 1.2829 as the dollar saw some bids. The pair then traded around 1.2830-40 levels before climbing now to just above the 1.2850 level as the dollar gives up some gains.
USD/CAD was one of the more livelier pairs as it traded around 1.3015 as the session began before rising bit by bit before spiking higher in the last hour. However, as mentioned above I'm a bit iffy on the spike here especially with positive NAFTA headlines overnight. But the chart shows that price has moved above the 100-hour MA so the bearish bias in the near-term is broken for the time being.
NZD/USD started the session around the highs close to 0.6700 as the kiwi was the best performer coming out of Asian trading. But as the dollar and yen caught bids, the kiwi also fell with NZD/USD dropping to 0.6675-85 levels. The pair moved to a low of 0.6670 in the last hour and trades just above it currently.
Looking ahead to US trading, expect thinner liquidity to play out as economic data releases will remain light. If anything, the two key things to watch will be equities (S&P 500 reaching new highs?) and the reaction to the NAFTA news over the weekend.
