Forex news from the European morning session - 30 October 2018
Headlines:
- Italy's Conte reiterates that government won't change budget deficit target
- UK CBI October retailing reported sales 5 vs 20 expected
- UK PM May: We are not preparing for a general election
- Eurozone Q3 flash GDP +0.2% vs +0.4% q/q expected
- Italy's government suffers budget setback as economic growth grinds to a stall
- Italy Q3 flash GDP 0.0% vs +0.2% q/q expected
- Germany October unemployment change -11k vs -12k expected
- Spain October preliminary CPI +0.9% vs +0.9% m/m expected
- Switzerland October KOF leading indicator index 100.1 vs 101.0 expected
- Saxony October CPI +0.2% vs +0.4% m/m prior
- France September consumer spending -1.7% vs -0.4% m/m expected
- UK's Hammond: Hopes that budget isn't a preparation for a general election next year
- UK budget and impact on Brexit
- France Q3 flash GDP +0.4% vs +0.5% q/q expected
Markets:
- AUD leads, JPY lags on the day
- European equities lower, surrendering early gains
- US 10-year yields up 2.3 bps to 3.108%
- Gold down 0.61% to $1,221.95
- WTI down 0.57% to $66.66
- Bitcoin up 0.10% to $6,250
The session started off with focus on risk sentiment as Asian equities rebounded solidly and that led to gains seen in E-minis as well. As a result, yen pairs were bid and USD/JPY began the session trading around 112.75.
The aussie and kiwi were also beneficiaries of the improved sentiment as it allowed for short covering. AUD/USD traded around 0.7090 to begin the session and hugged the 0.7080 to 0.7100 range throughout. A similar tone is seen in NZD/USD as the pair stayed around 0.6540 to 0.6560 in European trading so far even as risk fluctuated during the session.
European equities opened firmer but soon gave back gains a little before turning negative following Italy's disappointing Q3 GDP figures. That saw Italian bonds tumble and market optimism quickly faded with E-minis also flat lining after 0.5% gains earlier.
However, yen pairs were very much unphased with USD/JPY holding steady around 112.70 before bouncing higher to end the session now close to 112.85 at the highs. E-minis are holding steady with 0.4% gains currently.
But the major movers of the session belonged to the euro and the pound. The former had German inflation data working for it as the Saxony report showed a good bounce in terms of core inflation, but flagging economic growth continues to haunt the euro and that is the main story so far.
The single currency was dealt a blow by Italy first before the euro area reading disappointed as well to its slowest growth in 4 years. EUR/USD slipped from 1.1360 to a low of 1.1346 where it just trades above currently.
The pound didn't enjoy a very good session as well weighed lower by EUR/GBP buying into the month-end as well as concerns surrounding a possible general election following the budget yesterday. It has been a steady track lower for the quid as cable fell from 1.2780 to a low of 1.2740 early on before compounding those losses further in a move to 1.2729 after CBI retail survey data disappointed as well.
Looking ahead, it's still very much all about risk and I reckon the move - or should I say lack thereof - by yen traders so far is saying that "we'll wait and see what US equities do" before reacting.
