Forex news from the European morning session - 4 September 2019
Headlines:
- ECB's Lane: Most recent data points towards mediocre inflation outcomes
- Corbyn: Labour will not support an election until threat of no-deal Brexit has been removed
- US MBA mortgage applications w.e. 30 August -3.1% vs -6.2% prior
- HK leader Carrie Lam to formally withdraw extradition bill
- Scottish judge rules that Boris Johnson's prorogation of parliament does not contravene law
- Lagarde: Highly accommodative policy warranted for prolonged period
- UK August services PMI 50.6 vs 51.0 expected
- Germany August final services PMI 54.8 vs 54.4 prelim
- France August final services PMI 53.4 vs 53.3 prelim
- Labour's Starmer: We will not vote with Johnson on an election today
- Brexit: Boris Johnson has tabled motion to hold a general election
- HK's Lam reportedly to formally withdraw extradition bill
- BOJ's Kataoka: Rate cut is the most effective tool in stimulating economy, lifting inflation
Markets:
- GBP leads, JPY lags on the day
- European equities higher; E-minis up 0.8%
- US 10-year yields up 3.4 bps to 1.491%
- Gold down 0.8% to $1,535.03
- WTI up 1.4% to $54.71
- Bitcoin down 1.7% to $10,528
The pound is once again stealing the limelight as the currency rallies sharply as traders see jitters and fears surrounding a no-deal Brexit recede.
This comes after rebel/opposition lawmakers defeated the government yesterday to seize control in parliament and as Boris Johnson's election bid later today looks to be DOA.
Cable jumped up from 1.2100 to 1.2120 before making quick moves during the session towards 1.2200 before hitting a high of 1.2220 and now settling closer to the figure level.
As mentioned earlier, today appears to be another day in which the pound can find some reprieve but overall, no-deal Brexit risks will not be completely off the table and that may come back to bite at the quid over the coming days.
Meanwhile, markets in general are more upbeat as equities were already more optimistic at the start of the session only for news from Hong Kong to buoy sentiment further.
HK leader Carrie Lam announced that she will withdraw the controversial extradition bill and that gave European equities - US futures too - as well as bond yields a shot in the arm and markets haven't looked back since.
USD/JPY moved up from 106.05 to 106.30 and has been hovering around 106.10-20 levels since then. Meanwhile, the dollar stayed weaker across the board with EUR/USD using that as a platform to build on a move just above 1.1000 from 1.0980 levels earlier.
The aussie and kiwi stayed perky amid the better risk mood with the former also benefiting from Q2 GDP data that came in-line with estimates (there were some worries that it would've been worse) though the details are hardly encouraging.
Nonetheless, the yields play is siding in favour of a stronger AUD/USD as mentioned here and a break above the 8 August high of 0.6822 may precipitate a further run towards 0.7000 potentially if the right conditions allow for it.
Looking ahead, expect the focus to stay on Westminster and the pound still with markets also keeping an eye on the risk mood and any potential trade headlines.
