Forex news from the European trading session - 31 August 2018
Headlines:
- Italy Q2 final GDP +0.2% vs +0.2% q/q prelim
- Italy August preliminary CPI +0.5% vs +0.3% m/m expected
- Eurozone July unemployment rate 8.2% vs 8.2% expected
- Eurozone August preliminary CPI +2.0% vs +2.1% y/y expected
- Turkey's Erdogan says exchange rate has turned into "exchange bullet"
- BOJ tweaks bond purchase sizes, frequencies for September
- Italy July unemployment rate 10.4% vs 10.8% expected
- ECB's Rehn says US efforts to escalate trade war are regrettable
- France's Loiseau says that Barnier perfectly represents view of EU27
- France August preliminary CPI +0.5% vs +0.4% m/m expected
- Juncker says that EU will increase auto tariffs if the US does the same
- Germany July retail sales -0.4% vs -0.2% m/m expected
- UK August Nationwide house price index -0.5% vs +0.1% m/m expected
- Italy's Tria reportedly seeking 1.5% deficit/GDP ratio in budget law
- EU commissioner Oettinger reiterates warning to Italy on budget payments
- Is Indonesia next on the list of emerging market victims this year?
- ECB's Nowotny says that Italy's woes shouldn't delay rate hikes
- Turkey cuts tax on lira deposits, hikes tax on FX deposits - report
- Canada's Freeland says working to "get the right deal, not just any deal" on NAFTA
Markets:
- CHF leads, AUD lags behind on the day
- European equities all lower on the day
- Gold up 0.51% to $1,206.05
- WTI down 0.61% to $69.82
- US 10-year yields down 1 bps to 2.845%
- Bitcoin up 0.55% to $6,957
The session started off with overnight headlines of Trump possibly announcing tariffs to hit China, as soon as next week, weighing on markets. There wasn't much of a risk off move in the currencies space but that all changed when the European cash equity market opened.
With Juncker touting at the possibility of retaliating against Trump, that surely didn't help as stocks skid and continued in similar fashion throughout the session. That led to a bid in the yen across the board with USD/JPY moving from 111.00 to a low of 110.77.
The swissie was already bid to begin with and moved higher as USD/CHF fell to a low of 0.9652 while other major currencies also fell against the yen and the swissie. The risk off sentiment lingered for much of the session but the euro and pound did recover a little thereafter to move towards 1.1680 and 1.3010 against the dollar respectively before falling back again.
European equities continued to bleed further and that is keeping the fuel running on the risk off trades seen today. The aussie and kiwi fell late in the session with the former's drop being more notable as AUD/USD closes in on a test of the 0.7200 handle once again.
As the session draws to a close now, the pound and euro are continuing their declines to session lows on the day with the dollar, yen, and swissie staying bid against the rest of the major bloc.
Looking ahead, there's much action still to be had with a NAFTA deal still in the works, geopolitical tensions between US, China and EU still playing out, and Italy's credit rating set to be reviewed by Fitch after markets close.
