Forex news from the EUropean trading session - 5 July 2018
Headlines:
- BOE's Carney says interest rate increase will be limited and gradual over next few years
- BOE's Carney says data gives confidence that soft patch in Q1 is largely due to weather
- Iran's OPEC governor says Trump's tweets have increased oil prices by $10
- ECB's Praet says that the risk of deflation has vanished
- Eurozone June retail PMI 51.8 vs 51.7 prior
- Germany June construction PMI 53.0 vs 53.9 prior
- Switzerland June CPI 0.0% vs +0.1% m/m expected
- Spain May industrial production +0.9% vs +1.0% m/m expected
- UK would closely mirror EU's rules under new customs proposal - BBC
- Germany May factory orders +2.6% vs +1.1% m/m expected
- BOJ's Masai says upward price momentum is still intact
- BOJ's Masai says need to focus more on cumulative effect of monetary easing
- IMF cuts Germany's 2018 growth forecast to 2.2%
Markets:
- EUR leads, JPY lags behind on the day
- European equities higher, autos lead gains
- Gold down 0.24% to $1,251.65
- WTI crude up 0.51% to $74.52
- US 10-year yields up 2.5 bps to 2.857%
- Bitcoin down 0.88% to $6,628
It was a very cool, calm and collected session for the most part as European stocks rallied, ignoring the declines from Asian equities with automakers leading the way following a Handelsblatt report overnight saying US may suspend tariffs on EU car imports.
The euro gained early in the session in a follow through move to an overnight report by Bloomberg on the ECB here, before pushing to a high of 1.1711 later on before settling in around the 1.1680-90 region as option expiries anchor the pair as well as a triple top pattern in EUR/JPY.
There wasn't much action elsewhere as most other currencies traded in narrow ranges and remain to do so as we head into the US session.
Economic data was mostly secondary as the focus on the session was on BOE Carney's speech. Carney basically reaffirmed similar tones from the BOE's last meeting, and basically set the platform for an August rate hike. That gave cable a lift on the day as it broke free of the 1.3220-30 trading range to reach a high of 1.3267 before falling off a little thereafter. As mentioned here, data momentum is still needed to solidify any further expectations of a rate hike.
Apart from that, there wasn't much action elsewhere. Yen stayed weak on the day as equities rose and bond yields followed suit too. That's helping to keep some upside pressure on yen pairs ahead of US trading later - where equity futures are also pointing to a brighter start as earnings season is just around the corner.
Tight ranges are prevailing for the most part in commodity currencies with USD/CAD only sitting in a 25 pips range, and AUD/USD trading in a band of 28 pips. The kiwi is among the star performers today, but that owes more to do with cross-flows from AUD/NZD selling as highlighted here. In turn, that is what is pinning the aussie down on the day.
There wasn't much else in the session as we await US traders to rejoin the action after yesterday's break. Looking ahead, we'll have the Fed June meeting minutes to come ahead of US tariffs on China and non-farm payrolls tomorrow.
