Forex today: Brexit turmoil Big profile resignations, dollar bleeding, AUD/USD hungry for 0.73 handle
Thursday, 15 November 2018 · *Forex today saw UK ministers resigning over the Brexit plan which dominated headlines in Europe and price action trickled through into the North America session.*
· *But sentiment picked up in the US on reports that the next tranche of US tariffs on China **were** on hold. *
· *The greenback was bleeding and US yields sinking while US equities rose - The AUD/USD probed towards 0.7300 again. *****
On the political news, it was all attention to Brexit yet again with the UK’s political tensions heightened. Despite the Cabinet supporting the draft EU/UK withdrawal proposals, there were rolling headlines of Cabinet and junior ministerial resignations and more calls from Conservative MPs asking for a leadership challenge which has thrown the entire plan and deal back into jeopardy. Then, there was the news that China made an opening bid to the US on trade, however, its nothing that has not been heard before, which likely leaves the two sides to remain at an impasse, although it did raise spirits on Wall Street leading to a recovery in stocks. Trump and Xi are due to meet later this month on the 26th Nov in Buenas Aires at the G20 summit, but we will see if the US responds prior to that and anything positive that looks like progress towards finding a solution to their trade dispute will be bullish for risk-sensitive markets.
As far as data went, analysts at Westpac noted that the "US retail sales rose a decent 0.8% in October though rebuilding efforts in the wake of Hurricane Florence via big jumps in auto and building materials sales likely inflated gains. Net of that and revisions, the report overall tracked on the weaker side: the “control group”, a subset of sales that excludes food services, gasoline, auto and building materials and feeds directly in GDP rose a modest 0.3% (0.4% expected) and Sep was revised to 0.3% from 0.5%."
EUR/USD was pretty choppy in Thursday, price action that is likely to stick around considering how the Brexit saga is playing out of which the euro gets caught up in on cross flows and the uncertainties that prevail for the Eurozone. The pair moved between a range of 1.1271 and a high of 1.1362 with good two-way business for the scalpers. The single unit bottomed out on the Brexit headlines while rallied on dollar weakness and a slight switch up in sentiment with concerns for global growth seen impacting the US down the line. However, the IT/DE and US/EUR yield spreads continue to play into the hands of the bears dragging on rallies. EUR/USD ended the NY session at 1.1332. Cable was heavy into the North American close with endless angst over Brexit progress which has thrown PM May's leadership into jeopardy as resignations of ministers were reported throughout the day. Brexit Secretary Dominic Raab cabinet minister Esther McVey resignations less than just 24 hours after she PM May had received the approval of her cabinet for a draft Brexit plan. GBP/USD ended the session at 1.2765 having travelled between Thursday's range of 1.3030-1.2725. As for EUR/GBP, there was a strong Brexit rally and the pair jumped higher by +1.99%, ending New York trade at 0.8880 on heightened UK risks. USD/JPY was reaching the 38.2% Fib retracement target at the 113.09 late European session lows. However, in NY trade, profit taking ensued and China/US trade talk news lifted risk appetite and US stocks, sending the pair back to 113.70. However, but the bid from China to appease Washington is probably too little too late so traders will have to wait and see might come of potential talks between Xi and Trump at the Buenos Aires G20 summit later on in the month. USD/JPY ended NY at 113.66. US 10yr treasury yields dropped from 3.13% to 3.08% - a two-week low – but then recovered in late trade, while 2yr yields fell from 2.88% to 2.83%. The Fed fund futures yields continued to price the chance of another rate hike in December at 70%. As for the commodity complex, despite the turmoil, the complex was mostly higher on Thursday and metals were seen bid on the prospects for a lower USD. AUD/USD, subsequently has a look in at 0.73 the figure, falling just a couple of pips short of the target travelling from 0.7250 and once again taking on the 23.6% fibo of 2018's decline with bulls lining up for a test of the 0.73 handle and key resistance of R3 at 0.7330.
* **Key notes** from US session:*
· *Wall Street stages decisive recovery on Thursday*
· *What no-confidence vote means for Brexit and Pound?*