Forex news from the European trading session - 29 June 2018
Headlines:
- Trump is said to tell advisors that he seeks WTO withdrawal - report
- Swiss finance minister says current EUR/CHF rate is not a problem
- Eurozone June preliminary CPI +2.0% vs +2.0% y/y expected
- EU's Barnier says big divergences remain on Brexit
- UK May mortgage approvals 64.5k vs 62.3k expected
- UK Q1 final GDP +0.2% vs +0.1% q/q estimated
- China May FX reserves $3.11T vs $3.11T prior
- ECB to consider buying more longer-term bonds from 2019 as part of QE reinvestments - Reuters
- Germany June unemployment change -15k vs -8k expected
- Italy's Salvini says he welcomes migration deal but waiting to see "concrete commitments"
- Switzerland June KOF leading indicator 101.7 vs 99.7 expected
- France May consumer spending +0.9% vs +0.8% m/m expected
- France June preliminary CPI +0.1% vs +0.1% m/m expected
- CSU lawmaker says EU migration deal is a 'positive signal'
- Germany May retail sales -2.1% vs -0.5% m/m expected
- Japan June consumer confidence index 43.7 vs 43.8 expected
- Japan May housing starts +1.3% vs -5.7% y/y expected
Markets:
- EUR leads on the day, JPY lags behind
- European equities up on the day, but off the highs
- Gold up by 0.23% to $1,251.18
- WTI down 0.10% to $73.39
- US 10-year yields flat at 2.84%
- Bitcoin down 2.48% to $5,895
The session started off with good news as Chinese stocks posted a rebound and European leaders managed to reach a deal on migration policy overnight. That pushed the euro higher and with the risk-on mood, the dollar and the yen were the two biggest casualties as European stocks also opened with a buoyant mood.
The dollar then bounced back a little after testing key-near term levels but soon faltered as sterling also posted gains thanks to an upward revision to the quarterly estimate in its Q1 GDP data.
The greenback then tested the same key near-term levels again and steadied around there. And then we had a bombshell of a report from Axios saying Trump is pushing for the US to leave the WTO. That sent risk assets lower with the loonie and kiwi paring gains on the day against the dollar.
USD/JPY also fell from 110.70 to 110.50 in a jiffy as US equity futures and European stocks pare gains on the day.
Looking at individual currencies, the EUR/USD pushed higher prior to European trading after the migration policy deal was announced and the highs tested 1.1666 but fell thereafter as the dollar held on to key near-term support. Since then, the pair has been trading between 1.1630-50 levels and hasn't really done much.
USD/JPY was one of the quieter pairs as well - until the sudden jolt late in the session - as it traded between 110.60-70 levels for the most part before falling about 20 odd pips from the Trump-WTO report.
GBP/USD had one of the more interesting days as the pair traded higher alongside the euro early on to around 1.3140 levels before jumping to a high of 1.3183 on the back of the revised Q1 GDP report - which showed an uptick in the quarterly estimate. I wasn't convinced by the details though and it was a very straightforward fade-sterling moment if you ask me. Either way, the pair fell lower to around 1.3150 again before nudging lower towards the end of the session.
Apart from that, we saw commodity currencies move higher as risk-on sentiment prevailed right until the Trump-WTO report basically killed off the mood completely in the currencies space. The loonie and kiwi pared all gains against the dollar, but the aussie is still hanging on to some of its earlier gains.
In other news, the Swiss finance minister contradicted the SNB a little with a comment on the EUR/CHF exchange rate. That saw a bit of a dip in the pair before normal service resumed.
The market is still riding the feel-good factor for the most part despite the Trump-WTO report, but I reckon it's a lot to do with the migration policy (in which the euphoria will fade soon too) and the bounce in Chinese stocks earlier. If US equities start to turn sour later, it'll be tough to imagine the mood being still so cheerful.
