Forex news from the European trading session - 9 October 2018
Headlines:
- UK PM spokesman says Brexit deal hinges on details on future EU ties
- Italy's Tria says government would act in case of unexpected rise in yields spread
- Italy's Tria: Higher bond yields is due to uncertainty, not fundamentals
- Brexit: Barnier says working hard to "de-dramatise" backstop in talks with DUP
- Italy's Conte says growth is to be above IMF forecasts
- US September NFIB small business optimism index 107.9 vs 108.3 expected
- Italy's Tria: Budget is aimed at answering concerns of citizens
- China says it will not use the yuan as a tool in trade dispute
- Italy's budget watchdog to likely reject government's fiscal plan - report
- Will a Canadian style agreement really work for the UK post Brexit?
- Germany August trade balance €17.2 billion vs €16.2 billion expected
- Is the selloff in Italian markets overdone?
- ECB's Vasiliauskas says that there are elevated risks to global growth
Markets:
- JPY leads, EUR lags behind on the day
- European equities lower
- US 10-year yields up 1.1 bps to 3.244%
- Gold down 0.24% to $1,185.26
- WTI up 0.54% to $74.69
- Bitcoin down 0.58% to $6,584
The session started with major currencies trading tepidly but the Japanese yen was already decently bid as risk sentiment remains fragile in the wake of rising Treasury yields causing jitters in the equities space. European equities bucked the trend early on as Italian bonds inched higher to begin the session.
That provided little reprieve for the euro though with EUR/USD starting the session around 1.1500 before moving to a low of 1.1466 after Italy's budget committee was reported to reject the government's fiscal plans. Italian bonds cheered the news though but for currency traders, it's a different way of looking at things.
As Italy's finance minister Tria addressed parliament, he reiterated the government will stick to current fiscal deficit targets and his other comments later in the day did little to soothe investors. Italian bonds corrected the earlier move and yields reached multi-year highs again. That resulted in a more risk off tone across European equities and as E-minis took a tumble in the session, so did the rest of the major currencies against the dollar and the yen.
EUR/USD stuck around 1.1470 before slowly making its way lower to trade near session lows now at 1.1437 ahead of US trading as souring risk sentiment and Italy weighs on the single currency.
USD/JPY trades a little lower on the day as both currencies are well bid from the risk off vibes. The pair moved to a low of around 113.05 before trading between there and 113.25 for the session.
GBP/USD faced similar struggles to the euro as the pound is still weighed down by a lack of fresh updates to Brexit negotiations. GBP/USD started the session around 1.3090 before falling to 1.3050 levels as the pound was weighed down in early traders. As risk sentiment started to sour, cable fell further to a low of 1.3034 where it trades close to at the moment.
USD/CAD was pretty much steady for most of the session as oil prices trade higher today. The pair traded in a range between 1.2960-70 for the most part but has moved higher in the past two hours as the shift in risk tones helped to put a bid in the dollar. The pair now closes in on a test of the 1.3000 handle once again.
AUD/USD and NZD/USD traded in similar fashion once again as there is little catalyst apart from risk sentiment to drive moves in both commodity currencies today. AUD/USD started the session flat at around 0.7080 before moving lower as risk started tailing off and that sees the pair now trade near the lows now at 0.7056. NZD/USD moved in the same manner starting around 0.6450 before heading to a low of 0.6427 where it trades just above right now.
Once again, it's all about yields and risk sentiment in trading. And that's not likely to change in the session ahead.
