Forex news from the European trading session - 4 September 2018
Headlines:
- Rand tumbles as South Africa economy slips into first recession since 2009
- Oil is bucking the trend in the commodities space today...
- Eurozone July PPI +0.4% vs +0.3% m/m expected
- EU's Barnier reportedly said to prefer Canada-plus deal over Chequers proposals
- UK August construction PMI 52.9 vs 54.9 expected
- Switzerland August CPI 0.0% vs 0.0% m/m expected
- Turkey reported to give exporters 6 months to bring proceeds back to the country
- Full statement of the RBA's September monetary policy meeting
- RBA leaves cash rate unchanged at 1.50%
Markets:
- USD leads, NZD lags on the day
- European equities mostly lower, FTSE MIB only bright spot
- Gold down 0.57% to $1,194.16
- WTI up 2.18% to $71.32
- US 10-year yields up 0.9 bps to 2.869%
- Bitcoin up 0.13% to $7,308
It's been all about the dollar today and there isn't a close second for who is top dog in the currencies space. The session started off with the RBA holding its cash rate steady once again and prompted a relief rally in the aussie while the dollar held steady ahead of European markets open.
As the session started, European equities moved higher on the back of a late rally in Chinese equities alongside US equity futures and that also led to higher Treasury yields. The yen was the initial mover on the back of that - USD/JPY moved higher to 111.30 from 111.15 - but soon, the dollar capitalised on the situation as well.
EUR/USD fell from 1.1600 to touch lows around 1.1575 while GBP/USD fell 1.2860 to 1.2840 levels. As the session moved along, the dollar caught further bids and EUR/USD was sent to a low of 1.1550 while GBP/USD fell to a low of 1.2814 following yet another poor economic data release.
AUD/USD and NZD/USD were not spared as well despite the former's reprieve post-RBA, as both pairs hit new lows for the year. AUD/USD fell after hitting a high of 0.7235 earlier to a low of 0.7157 before recovering a little thereafter as key support levels are in play.
NZD/USD fell to a low of 0.6541 - the lowest level since February 2016 - and threatens a firm break of the daily support at 0.6545 at the moment ahead of the close today.
Apart from that, USD/CHF looks poised for its biggest daily gain in more than two months as the pair steadily rises to a high of 0.9745 earlier and is trading around there still.
There wasn't much else apart from pure dollar strength across the board as commodities faltered against the greenback as well. The only exception is oil as Tropical Storm Gordon looks set to hamper supply in the Gulf Coast.
The dollar's rally today isn't much to do with headlines or what not but can be owed to some consideration with regards to positioning, in my view. At the end of last month, there was heavy talks of flows out of the dollar into month-end and that could've played a part in the dollar's weakness. Essentially, fundamentally we're no different to where we are at the start of August. But the retracement since mid-August has helped to flush out stretched positioning in the greenback and that helps to reinvigorate buyers to come back in.
Apart from that, if you'd notice and as mentioned earlier, there are near-term breaks in USD/JPY, EUR/USD, and GBP/USD that has seen the bias now favouring dollar bulls. When there is a breakout across multiple charts occurring at roughly the same time, it's a sign that the winds are changing and momentum is now starting to side back with dollar bulls.
