The European currencies (GBP, EUR, CHF) were in a three-way race to the bottom, with the pound ultimately winning the (dis)honor of being the session’s biggest loser.
The Aussie, meanwhile, was the biggest winner, likely because of the risk-on vibes and rising gold prices.
The Kiwi is also worth highlighting since it was also in demand at the start of the session. However, it closed out the session mixed and a net loser, apparently because of New Zealand Finance Minister Robertson’s comments about the Kiwi and the effects of the trade war on New Zealand’s economy.
- German final HICP y/y: unchanged at 2.2% as expected
- Euro Zone industrial production m/m: 1.0% vs. 0.4% expected, -0.7% previous
- Euro Zone industrial production y/y: 0.9% vs. -0.2% expected, 0.3% previous
NZ’s Robertson speaks
New Zealand Finance Minister Grant Robertson was interviewed by Bloomberg earlier.
Robertson was asked about the ongoing trade war between China and the U.S. and he said that:
“From New Zealand’s exporter’s perspective, we’re not seeing a huge impact at the moment from the tariff war, but if it expands and if we see a greater level of tit-for-tat exchange, that will have a serious impact on our exporters and ultimately on economic growth in New Zealand.”
Robertson was then asked about the Kiwi’s recent depreciation, and he had these to say:
“It’s still very strong against our other trading partners, particularly Australia.”
“We’re not uncomfortable where we are at the moment and we’ll continue to ensure that we have strong fundamentals in our economy.”
ECB Overlord Draghi gave a speech earlier during the session. And he didn’t seem to say anything new at first glance since he presented a generally positive overview of and outlook on the Euro Zone economy.
However, the Draghster had this to say about inflation (emphasis mine):
“Looking ahead, underlying inflation is expected to pick up towards the end of the year and then increase gradually over the medium term, supported by our monetary policy measures, the continuing economic expansion and rising wage growth. The latest ECB staff projections foresee annual euro area headline inflation at 1.7% in 2018, 2019 and 2020.”
And if y’all can still recall, Draghi had this to say during a September 24 speech:
“Looking forward, annual rates of HICP inflation are likely to hover around current levels in the coming months and are projected to reach 1.7% in each year between now and 2020. This stable profile conceals a slowing contribution from the non-core components of the general index, and a relatively vigorous pick-up in underlying inflation.”
Other market analysts apparently picked up on that tweak in language and the euro began to encounter sellers.
Some Brexit-related updates
This tweet began to make the rounds earlier during the session, which caused the pound to plunge as Brexit-related jitters flared up.
BREAKING Guido sources say PM will be making a public statement later today that UK will not agree to be trapped permanently in a customs union in any circumstances. Kick back on @bbclaurak report was firm.
— Guido Fawkes (@GuidoFawkes) October 12, 2018
Theresa May’s spokesman declined to comment on the validity of that tweet. And there was this follow-up tweet later on, which caused the pound’s slide to abruptly stop on most pairs.
UPDATE: May is NOT making a public statement but the Government is expected to clarify its position today
— Guido Fawkes (@GuidoFawkes) October 12, 2018
Unfortunately for GBP bulls, a spokeswoman for Theresa May later had this to say:
“The prime minister would never agree to a deal which could trap the UK in a backstop permanently.”
Some risk-taking to end the week
After being plagued by risk aversion for most of the week, the major European equity indices encountered buyers during today’s morning London session.
And according to market analysts, the risk-friendly vibes in Europe were due to bargain buying after this week’s sell-off, although China’s trade data from earlier was also cited as another reason for the the improved risk sentiment in Europe.
- The pan-European FTSEurofirst 300 was up by 0.37% to 1,418.83
- Germany’s DAX was up by 0.52% to 11,598.26
- The blue-chip Euro Stoxx 50 was up by 0.20% to 3,216.65
Major Market Mover(s):
The Aussie claimed the top spot during the morning London session, thanks to the risk-friendly vibes and rising gold prices. Short-covering is also a possibility since the Aussie is one of the big losers this week.
AUD/USD was up by 11 pips (+0.15%) to 0.7127, AUD/NZD was up by 16 pips (+0.15%) to 1.0942, AUD/CHF was up by 18 pips (+0.25%) to 0.7062
The pound found itself at the very bottom of the forex head during the session, thanks to that Guido Fawkes tweet and the statement from Theresa May’s spokeswoman, which reignited Brexit-related concerns.
GBP/USD was down by 31 pips (-0.24%) to 1.3208, GBP/JPY was down by 57 pips (-0.38%) to 148.32, GBP/AUD was down by 75 pips (-0.40%) to 1.8531
The euro was the second biggest loser of the session. The euro actually began encountering sellers at around 5 am GMT, which is before the morning London session even rolled around. There were no apparent catalysts for that, though.
But during the session itself, Draghi’s speech was apparently the culprit for the euro’s slide.
EUR/USD was down by 14 pips (-0.12%) to 1.1577, EUR/JPY was down by 34 pips (-0.26%) to 130.01, EUR/AUD was down by 45 pips (-0.28%) to 1.6244
The Swissy finished the session in third-to-last place , likely because of the risk-friendly vibes, although SNB meddling is always a possible reason as well.
USD/CHF was up by 10 pips (+0.10%) to 0.9910, NZD/CHF was up by 8 pips (+0.12%) to 0.6455, CAD/CHF was up by 10 pips (+0.13%) to 0.7619
Watch Out For:
- 12:30 pm GMT: U.S. import prices (0.3% expected vs. -0.6% previous)
- 1:30 pm GMT: Chicago Fed President Charles Evans will speak
- 2:00 pm GMT: University of Michigan’s consumer sentiment index (100.8 expected vs. 100.1 previous)
- 4:30 pm GMT: Atlanta Fed President Raphael Bostic is scheduled to speak