Forex news from the European morning session - 31 January 2019
Headlines:
- US January Challenger job cuts +18.7% vs +35.3% y/y prior
- UK PM spokesman: May's position unchanged, UK will leave EU on 29 March
- Andrea Leadsom says government may have to cancel parliament's February recess
- Italy Q4 preliminary GDP -0.2% vs -0.1% q/q expected
- Eurozone Q4 preliminary GDP +0.2% vs +0.2% q/q expected
- UK's Hunt: Can't know at this stage if extension to Brexit process is needed
- Spain Q4 preliminary GDP +0.7% vs +0.6% q/q expected
- France January preliminary CPI -0.5% vs -0.6% m/m expected
- Germany December retail sales -4.3% vs -0.6% m/m expected
- BOJ's Amamiya: Won't rule out any options if central bank were to ease further
- BOJ's Amamiya: If Fed policy helps to keep US economy strong, that's good for Japan
Markets:
- JPY leads, USD lags on the day
- European equities mixed, off the highs; E-minis up 0.1%
- US 10-year yields down 1.4 bps to 2.663%
- Gold up 0.3% to $1,324.50
- WTI flat at $54.20
- Bitcoin down 0.6% to $3,413
It was still all about the dollar following the FOMC meeting overnight where the Fed signaled more dovish tones to markets. The greenback started the session on the back foot but recovered a little mid-way through the morning before slipping again now ahead of US trading.
The yen is leading gains as risk sentiment faltered during the session after a buoyant start in Asia as the post-FOMC euphoria is wearing off. European equities began with solid gains before turning mixed on the day after Eurozone Q4 GDP figures confirmed a slowdown as Italy slipped into a technical recession.
USD/JPY began the session around 108.70 levels before slowly slipping towards two-week lows near 108.50 as Treasury yields slip a little and US equity futures pared earlier gains.
Meanwhile, EUR/USD started the morning by trading to a high of 1.1514 before slipping to 1.1490 as the dollar recovered some poise during the session. The single currency slipped a little further after headlines crossed on Italy's recession and that sent the pair down to a low of 1.1472 before it is recovering now back towards 1.1500 ahead of US trading.
GBP/USD had an eventful session as the pair raced to a high of 1.3157 early on and threatened a move above the 100-hour MA but it proved to be unsuccessful and the pair fell back towards flat levels of 1.3117 before trading around 1.3120-30 currently.
Risk currencies were little changed for the most part as the aussie and kiwi maintained their gains throughout the session with AUD/USD trading at the highs now close to 0.7280 after having spent the entirety of the session above 0.7260.
USD/CAD was a bit exempt to that as the pair fell to a low of 1.3121 in the early European morning and tested the 200-day MA. But sellers found it tough to break the level again before the pair rebounded back towards 1.3140 currently.
Looking ahead, the focus will turn towards how much more can markets squeeze out of the "Fed put" for the time being given that plenty of the negativity was already priced in before the FOMC meeting yesterday. Aside from that, trade talks aren't likely to produce any startling headlines just yet so I reckon that we may have to be stuck with the period of lull around these levels ahead of the US non-farm payrolls report tomorrow.
