Forex news from the European morning session - 29 January 2019
Headlines:
- UK government looks to be leaning towards Brexit 'Plan C'
- Brexit: Labour said to be backing the Cooper Amendment
- Arlene Foster: DUP endorses the 'Malthouse Compromise'
- Sterling overnight implied volatility hits two-week high ahead of Brexit amendment votes
- Brexit: Brady Amendment said to pass first hurdle ahead of parliament session
- Brexit: Reports still suggest no firm position from most sides, May's language to be key
- Theresa May reportedly will tell MPs that she will seek legally binding changes to the backstop
- France January consumer confidence 91 vs 88 expected
Markets:
- NZD leads, CHF lags on the day
- European equities higher; E-minis flat on the day
- US 10-year yields down 0.5 bps to 2.738%
- Gold up 0.4% to $1,308.90
- WTI up 0.9% to $52.48
- Bitcoin down 0.9% to $3,385
It was a session that began quietly but was slowly dominated by Brexit headlines with the UK parliament set to vote on a series of amendments that will determine the next step in the Brexit process later this evening. The pound waffled around during the European morning as sterling O/N implied volatility hits a two-week high as traders continue to deal with the uncertainty ahead of the votes later.
Cable moved to a low of 1.3130 to start the session before climbing up to a high of 1.3177 as the dollar weakened slightly earlier as well. The pair then fell back to 1.3140 levels before now moving back up to near 1.3170 ahead of the Brexit debate which is set to begin at 1330 GMT now (delayed from 1245 GMT).
As it stands, it's all boiling down to two amendments which are seen to be a knife's edge in terms of the voting outcome: the Brady Amendment and the Cooper Amendment.
May is backing the former in hopes that she will have something to show for in responding to the European Union while Labour is supporting the latter in hopes to stifle May's negotiating position and a significant majority of parliament members are hoping to obligate the government to rule out a no-deal Brexit option.
Other major currencies traded in a more subdued manner with EUR/USD ranging between 1.1420-40 levels for the most part as the dollar remains sluggish ahead of the Fed meeting tomorrow. Meanwhile, USD/JPY recovered from 109.20 levels to trade near the highs now close to 109.50 as risk turned around from the sour tones in Asian trading to a slightly more optimistic tone with Apple earnings in focus after market close today.
The kiwi maintained its gains with NZD/USD trading between 0.6840-60 for the most part after benefiting from a stronger yuan fixing once again by the PBOC earlier. That also helped the aussie recover to trade between 0.7155-75 after having dipped to a low of 0.7138 in Asian trading following poor business conditions data.
While all that is happening, gold is threatening a bullish breakout as it takes a peek above the June 2018 high and trades at its highest level in eight months ahead of US trading now. Looking ahead, expect risk sentiment to drive further movement in other major currencies but traders will also be very much entangled with the Brexit drama that is set to unfold later today.
