Forex trading headlines from the European morning session 23 October
- Chinese bank write-offs prompt default rumours, and markets panic
- Chinese money market rates rise sharply
- BOE MPC minutes show no concern for GBP strength. Full minutes here.
- UK BBA mortgage approvals sept 42,990 vs 38,834 prev
- BOJ’s Kuroda expects prices to rise as negative output gap narrows
- Nikkei closes down 1.95% at 14,426.05
- Shanghai comp index closes down at 1.25% at 2183.11
- EU summit expected to decide timeline for banking union
- ECBs Angeloni wants to avoid credit crunch in Europe
- Germany confirms 2013 growth at +0.5%
- Bank of Spain says economy grew +0.1% Q3 vs Q2
- Portugese fin min says restructuring debt will not solve problems
- French business climate oct 98 vs 98 exp 97 prev
- Italian trade balance sept flash EUR +0.32 bln vs +0.57 bln prev
It was all kicking off from the start today as the release of details of bad debt write-offs by Chinese banks led to rumours of bank defaults. Throw in surging Chinese money market rates causing Asian stocks to tumble and we had a rush into the yen at rapid pace as stop-losses kicked in as traders ran for the exits.
AUDJPY was the first to get a slap and we’ve fallen to 93.42 from 95.68 highs with USDJPY slumping to 97.15 and AUDUSD testing support at 96.00, posting a low so far of 96.07. The kiwi followed suit as did other yen pairs to a lesser degree.
Talk that ACBs were once again buying euros for USD-diversification gave that ccy some cushion and talk of yen now being added to that shopping basket added to its own panic-buy demand.
With EURUSD reluctant to come down we saw cable get dumped as GBPCHF selling triggered stops on EURGBP through 0.8500 to 0.8529 driving GBPUSD down to 1.6135. The pair saw a rally to 1.6175 on slightly bullish MPC minutes but was soon under attack again and then dropped further on a second/third wave of yen buying which saw it post 1.6120 lows.
A crazy morning which caught markets on the back foot, and some, as traders try to digest the validity of the NFPs as well as assess whether the moves in this session are overdone or a sign of more to come.
The jury is still very much out, and the volatility isn’t going back in the box just yet.