Forex news from the European morning session - 30 January 2019
Headlines:
- US MBA mortgage applications w.e. 25 January -3.0% vs -2.7% prior
- German economy ministry cuts 2019 growth forecast to 1.0% from 1.8% previously
- Brexit: Coveney says that Ireland's stance is not going to change
- Eurozone January final consumer confidence -7.9 vs -7.9 prelim
- Tusk and May to hold phone call on Brexit later today
- UK December mortgage approvals 63.8k vs 63.1k expected
- Switzerland January Credit Suisse investor sentiment -44.0 vs -22.2 prior
- Austria's Kurz reiterates that EU is not ready to renegotiate Brexit
- Switzerland January KOF leading indicator 95.0 vs 96.7 expected
- Theresa May reportedly will invite Jeremy Corbyn for talks later today
- France December consumer spending -1.5% vs -0.3% m/m expected
- Germany February GfK consumer confidence 10.8 vs 10.3 expected
- France Q4 preliminary GDP +0.3% vs +0.2% q/q expected
Markets:
- AUD leads, CHF lags on the day
- European equities mixed; E-minis up 0.5%
- US 10-year yields up 1.2 bps to 2.722%
- Gold up 0.1% to $1,113.52
- WTI up 1.1% to $53.89
- Bitcoin up 1.2% to $3,442
There wasn't much action on the session as markets remained calm with US-China trade talks and the first FOMC meeting of the new year lurking just around the corner.
The aussie is the lead gainer but made its move during the Asian session after slightly better-than-expected CPI data helped to give it a nudge higher. But during the course of the session, higher iron ore prices as well as a stronger Chinese yuan continued to underpin the aussie with AUD/USD trading close to 0.7200 since the early morning.
Aside from that, the loonie was arguably the standout performer as it gained alongside oil prices - due to the Venezuela sanctions situation - as USD/CAD slowly tracked lower from 1.3260 to a low of 1.3218 on the day before recovering to near 1.3230 currently.
The pound also got a nudge higher despite some market participants believing that a risk of a no-deal outcome has increased following yesterday's Brexit amendment votes. Cable moved up from 1.3070 to a high of 1.3122 before backing off to hug the 1.3100 handle currently. As it stands, the European Union is insisting it won't renegotiate the withdrawal agreement but acknowledged that some concerns can be eased via possible changes to the political declaration.
Other major currencies were mostly stuck in range with EUR/USD playing ping pong between 1.1425-40 levels for the most part. Meanwhile, USD/JPY inched up on the day from 109.30 to near the highs of 109.44 currently (how exciting) as risk sentiment improves following earnings beat from Alibaba and Boeing in the last hour.
Looking ahead, it's all about the FOMC meeting and as mentioned earlier, I would expect the Fed to focus on the theme of 'patience and flexibility'. I don't expect Powell to validate recent reports about an early balance sheet runoff and mostly reiterate what he mentioned about that in December. Either way, I believe markets are focusing too much on that with little correlation seen with equities and yields in my view.
Nonetheless, there wasn't much market attention to it before so that could explain the lack of correlation so let's see what the Fed has in store for us later. Hence, watch out for the language on the issue as that could have some implications on the dollar as well.
