Forex news from the European trading session - 7 June 2018
Headlines:
- CBRT raises one-week repo rate to 17.75%
- UK PM May and David Davis still clashing over Brexit talks
- Istat says that it sees the Italian economy slowing in the coming months
- Eurozone Q1 final GDP +0.4% vs +0.4% q/q prelim
- Kim Jong Un said to have invited Trump to Pyongyang - report
- Italy April retail sales -0.7% vs -0.2% m/m prior
- UK May Halifax house price index +1.5% vs +1.0% m/m expected
- Switzerland May foreign currency reserves CHF 740.9 bn vs CHF 757.1 bn prior
- France April trade balance -€4.95 bn vs -€5.30 bn expected
- Australia May foreign reserves AUD 82.5 bn vs AUD 72.8 bn prior
- Germany April factory orders -2.5% vs +0.8% m/m expected
- Switzerland May unemployment rate 2.4% vs 2.5% expected
- Japan April preliminary leading indicator index 105.6 vs 105.6 expected
Markets:
- CHF leads on the day, AUD lags behind
- European equities a little higher on the day
- Gold up by 0.16% to $1,298.41
- WTI up by 1.00% to $65.38
- US 10-year yields up by 1.3 bps to 2.985%
- Bitcoin up by 1.00% to $7,698
The session started off with narrow ranges yet again, but soon picked up as European traders continued to bid up the euro as further hawkish expectations filter in ahead of the ECB meeting next week. EUR/USD broke above the 1.1800 handle and pulled ahead on the day, reaching a high of 1.1839 before settling at the 1.1820 levels.
The bid in the euro also helped to give a lift to the swissie, as the latter rose in tandem and with the dollar faltering, USD/CHF looks to be on track for a further downside move and that helped to keep the CHF further bid on the day.
USD/JPY meanwhile traded very narrowly in the session around the 110.00 handle. With large expiries sitting at the figure level and a lack of key catalysts, it's not all too surprising.
GBP/USD had an interesting session with the pound initially rising to compete with the euro, but as Brexit talks start trickling back in sterling has been dragged lower as a result. As I highlighted in most sterling posts since the start of the month, focus on Brexit is back ahead of the EU summit to come later this month. There will also be a House of Commons vote on the Brexit bill on 12 June so look out for that too.
The laggard on the day has been the AUD. It fell after trade balance data missed estimates, but also as a result of technical selling (in my view) against the yen and kiwi. AUD/USD trades near the lows for the day, but similar to other commodity currencies their ranges remain relatively narrow.
Apart from that, we also had the Turkish central bank rate decision where they raised rates by 125 bps in a surprise move. The move was seen as a surprise as the market forecasts were somewhere between a no hike to a 100 bps move, so that was more hawkish than expected.
The lira has gained further ground since the decision and this should provide investors and the currency with some relative calm in the near-term. But things are not out of the woods just yet, with the presidential election due on 24 June. I'm sure Erdogan is just waiting in the wings to chime in after he wins.
