Forex news from the European trading session — 12 January 2018:
- China December M2 money supply y/y +8.2% vs +9.1% expected
- Spain December CPI y/y +1.1% vs +1.2% expected
- France December final CPI m/m +0.3% vs +0.3% prelim
- Italy November industrial production m/m +0.6% vs +0.6% expected
- Japan December economy watchers sentiment 53.9 vs 55.1 expected
- German party leaders reach breakthrough in coalition talks — report
- Bank of Korea tells staff not to trade cryptocurrencies at work
- German Economy Ministry: Economy is on strong upward path
- German coalition said to reach preliminary deal in talks — report
- More details on the preliminary agreement by German party leaders
- EU’s Juncker: ‘Very happy’ that German parties have a coalition deal
- Schulz: Unanimous agreement for mandate to negotiate a coalition
- PBOC official says monetary and credit conditions are normal
- UAE energy minister: Rise in oil prices caused by winter demand
- Nikkei 225 closes lower by 0.24% at 23,653.82
- Chinese Bitcoin miners are turning to Canada for potential mining sites
- EUR leads on the day, AUD lags behind
- European equities mostly higher on the day
- Gold is up 0.68% to $1,331.38
- WTI crude is down 0.72% to $63.34
- US 10-year yields is up 1.3 bps to 2.55%
- Bitcoin is up by 3% to $13,917
Things started off slowly on the session, with most major pairs trading well within narrow ranges from the Asian session. Then, came news of a breakthrough in coalition talks in Germany between Merkel’s Conservatives and the SPD party. EUR/USD popped to 1.2075 before falling back to 1.2060 levels.
But then, further confirmation of the news — coupled with further dollar weakness — came and in a matter of seconds EUR/USD jumped up to above 1.2100 — reaching three-year highs. From there, it hasn’t looked back as there’s not much resistance sitting between current levels up until 1.2167 at least.
The dollar remains on the backfoot on the day, only gaining against commodity currencies whilst slipping badly against the sterling, swissie and the euro. The dollar index has fallen to lows not seen since September last year, ahead of inflation and retail sales numbers due later.
GBP/USD got a pop on the back of dollar weakness and looks set to test the 2017 highs at 1.3657 as I mentioned here.
The Japanese yen briefly touched under 111.00 against the US dollar — but so far it seems that large option expiries may be holding the pair from falling further.
Meanwhile, the Canadian dollar has failed to get a lift in spite of dollar weakness as NAFTA talks still casts a big shadow on the loonie it seems. The pair is more or less unchanged on the day at 1.2525.
The NZD and AUD remain the laggards on the day as earlier news from China’s trade balance show that imports slumped heavily in the December y/y reading — which does not bode well for Asian growth (as well as those who rely heavily on trade with China like Australia and New Zealand). Though I did mention here that commodities are less impacted from the drop — but still.
NZD/USD has been trading in a relatively narrow range on the day, with the pair now at 0.7255 — almost unchanged on the day.
AUD/USD touched a high of 0.7905 in Asian trading, but as I highlighted there are large offers sitting just above 0.7900 that’s keeping a lid on prices for the time being — so that’s helping to keep the pair pinned down for the time being, with it trading at 0.7870.
Meanwhile, Bitcoin remained fairly stable on the day as it seems that the panic after yesterday’s South Korean regulators’ crackdown is starting to fade. And in commodities, gold continues to rise on the back of dollar weakness as well an uptick in the global inflation rhetoric following yesterday’s ECB minutes release — now breaking through a key resistance pocket to $1,331.38.