Forex news from the European morning session - 29 October 2018
Headlines:
- UK September mortgage approvals 65.3k vs 64.7k expected
- Merkel said to have told CDU colleagues she may not run for another term as party head
- Market confidence on Eurozone inflation expectations is starting to wane
- SNB total sight deposits w.e. 26 October CHF 578.0 bn vs CHF 577.9 bn prior
- Italian bonds cheer S&P's decision to maintain nation's credit rating
- More headline Brexit drama for the week ahead
- BOJ reportedly eyeing tweaks to bond-buying operations
Markets:
- NZD leads, JPY lags on the day
- European equities higher - Italy leads, E-minis up 0.6%
- US 10-year yields up 1.5 bps to 3.091%
- Gold down 0.25% to $1,230.05
- WTI down 0.28% to $67.40
- Bitcoin down 0.18% to $6,390
The session started off with tepid tones in Asian equities as Chinese mainland stocks led losses but US equity futures were kept flat. USD/JPY traded around 111.85 to 112.00 as a result and major currencies were very much sluggish to begin with as markets awaited fresh direction.
But as we approached European markets open, Italy's bond market rally helped to contribute to some general risk on sentiment in equities. And as sentiment improved throughout the session, also helped by China's consideration to cut car sales tax, that helped yen pairs to rally and E-minis which were trading 0.2% lower to begin the session is now 0.7% higher on the day.
That helped to lift USD/JPY to session highs of 112.26 where the pair trades close to currently. In turn, that's helping to keep commodity currencies buoyed on the day as well with the kiwi being the major beneficiary trading near the highs at 0.6549 currently against the dollar.
Meanwhile, we also got reports that German chancellor Angela Merkel is said to have told party members that she will not stand for re-election in December as CDU party head and that led to a bit of selling in the euro. EUR/USD moved lower from 1.1390 to 1.1361 on the back of that but recovered some of its poise thereafter.
However, the pair continues to find it difficult to move above the 100-hour MA and now falls back close to the 1.1400 after having rebound to a high of 1.1417 earlier.
It's setting up to be a very risk-related session in North American trading as we await the US cash equity market to open, but also keep an eye on news from the UK as finance minister Philip Hammond is set to present the budget in parliament.
Aside from that, expect more German political news to hit the wires as we await official word to come from the government on Merkel's political career.
