Forex news from the European trading session - 29 August 2018
Headlines:
- UK's Raab reportedly frustrated by Barnier's lack of availability for talks
- Japan's government maintains August economic assessment, downgrades view on exports
- Switzerland August Credit Suisse investor sentiment -14.3 vs -4 prior
- Different week but same old Turkish lira...
- France Q2 preliminary GDP +0.2% vs +0.2% q/q flash estimate
- The RBA's ability to raise its cash rate has taken yet another hit
- Germany September GfK consumer confidence 10.5 vs 10.6 expected
- Australian banks begin to ramp up the pressure on consumers
- Italian government said to reach out to ECB for new QE round - report
- BOJ's Suzuki says that expanding yield range is not the same as a rate hike
- Japan August consumer confidence index 43.3 vs 43.3 expected
- Germany's Scholz says there can only be losers in a trade war
Markets:
- GBP leads, AUD lags behind on the day
- European equities lower
- Gold up 0.22% to $1,203.56
- WTI up 0.35% to $68.78
- US 10-year yields down 1.1 bps to 2.869%
- Bitcoin up 0.08% to $7,089
It's been a steady session for the most part apart from early headlines which sparked some movement across the board. It started off with Westpac announcing that they would be raising their variable mortgage rate by 14 bps - sparking a move lower in Australian yields and the aussie. That saw the greenback catch a bid a little as there was also a report out saying that Italy is asking the ECB to deliver on a new QE program for the country.
The euro and aussie slipped while the dollar was bid on the back of the headlines there. But the greenback's gains against the other major currencies were short lived. As the session progressed, flat tones are being observed across the board with ranges still relatively narrow.
The pound though was the notable mover as it recouped losses across the board before pushing to the day's highs late in the session. This comes despite continued news hitting the wires that the October deadline for Brexit negotiations to conclude look more and more unlikely to be met.
Though from a technical standpoint, the morning star pattern highlighted at the start of the week is looking very much justified still at this point:
But I still stand by the view that Brexit headlines will be the ultimate driver and if there are more concrete details of failed negotiations/higher likelihood of a no-deal outcome, that will weigh on the pound still.
Other than all of this, ranges for major pairs remain relatively tight i.e. USD/JPY (20 pips), USD/CHF (17 pips), NZD/USD (29 pips). Even EUR/USD is also stuck in a relatively narrow range of 35 pips. USD/CAD was the early mover in Asia but in European trading the pair pared the earlier losses and traded between 1.2930-50 for the most part as NAFTA talks will be the main highlight ahead of US trading.
Looking ahead to the next session, there's US Q2 GDP to come at 1230 GMT and there's also some Brexit risk as Dominic Raab is set to answer questions in parliament at 1300 GMT.
