Forex news from the European trading session - 11 September 2018
Headlines:
- Russia says that current rouble situation does not require any special measures
- US Treasuries are telling markets not to panic... yet
- US August NFIB small business optimism index 108.8 vs 108.0 expected
- Germany September ZEW survey current situation 76.0 vs 72.0 expected
- China is to ask WTO for authorisation to impose trade sanctions on US
- UK July average weekly earnings +2.6% vs +2.4% 3m/y expected
- Italy's Moavero says does not expect the country to clash with the EU over budget
- Japan August preliminary machine tool orders +5.3% vs +13.1% y/y prior
- France Q2 final private sector payrolls +0.1% vs +0.2% q/q prelim
- Japan July tertiary industry index +0.1% vs +0.1% m/m expected
- Mexico says they are open to sign a bilateral trade deal with the US
Markets:
- CHF leads, AUD lags behind on the day
- European equities are all trading lower
- Gold down 0.13% to $1,194.33
- WTI up 0.40% to $67.81
- US 10-year yields up 2 bps to 2.951%
- Bitcoin up 0.24% to $6,317
The session started off with markets in a more positive mood following Asian trading. The Nikkei led gains in Asian equities and that helped to generate some spillover in positive sentiment to European equities too. The yen was already on the back foot to begin with and fell further as a result alongside the dollar.
Among the key beneficiaries from this were the euro and the pound. Cable moved higher from around 1.3030 levels to a high of 1.3063 while EUR/USD made its way from 1.1600 to the 1.1620 level. At the same time, GBP/JPY climbed to near two-week highs as the yen stayed offered.
The session continued along the same lines and saw further losses for the yen and the dollar. EUR/USD then moved to a high of 1.1644 while cable touched a high of 1.3087 on the day. During this time, USD/CAD inched lower towards 1.3130 levels while AUD/USD and NZD/USD traded at session highs of 0.7129 and 0.6541 respectively.
Then, came the real drama for the session. The pound got some good news from wages data but then got hit hard when some selling turned into a plunge as China said it would request permission from the WTO to impose trade sanctions on the US. In a flash, cable sank from 1.3060 levels to a low of 1.2990 before recovering some gains.
US equity futures also fell on the headline alongside most other currencies against the yen and the dollar. EUR/USD fell from 1.1630 levels to 1.1600 again but the main casualty was the pound, as Brexit sentiment shows exactly how fragile the currency remains.
The fall in US futures also led to selling in European equities and that has sparked a renewed bid in the swissie. EUR/CHF was trading well above 1.1300 the entire session but then has fallen to near the lows now around 1.1277. The only saving grace for risk sentiment right now is US Treasuries, which hasn't seen any bids in light of the risk aversion flows across other assets.
As the session draws to a close now, the euro and pound continues to slip across the board while the yen has recovered some of its earlier losses. EUR/USD now trades back under 1.1600 while the GBP/USD trades around 1.3019 after having recovered to around 1.3030 earlier.
USD/JPY was more subdued as it traded around 111.40 to 111.50 levels for the most part before falling a little now ahead of the US session.
Looking ahead, trading today will be heavily tied to risk sentiment and flows so keep an eye out on US stocks and Treasuries. Those two will be key telling points in any market movement in the session to come. However, do be wary once again of any rallies in risk. If anything, the trade headline scare is merely a taste of what how fragile risk sentiment in markets are right now.
