Market Drivers October 30, 2018
Risk on flows help Aussie, kiwi
Euro and cable remain offered
Nikkei 1.45% Dax 0.5%
Europe and Asia:
EUR GE Unemployment -11 vs. -12
EUR EU GDP 1.7% vs. 1.8%
Currency markets were quiet on Tuesday with most of the majors contained to narrow 30 pip ranges, but the euro was demonstrably weaker as the miss in GDP data only added to market concerns.
The euro slipped to a session low of 1.1355 after EU GDP came in at 1.7% vs. 1.8% eyed a sharp drop off from the 2.2% growth the period prior. This was the weakest reading in 4 years and poses a serious obstacle to ECB’s desire to normalize rates at the start of 2019.
With growth in the region slowing, the uncertainty of Brexit looming and the fresh spectre of political disarray after Angela Merkel announced yesterday that she will step back from politics and end her career as chancellor when the term expires in 2021, the euro now faces an array of risks that could pressure the currency to fresh multi-month lows. For now, the pair is holding ahead of the 1.1350 support, but a break there could take the unit towards a retest of recent swing lows below 1.1300.
With no data out of US today, risk flows will likely drive trade in North America. USDJPY has been inching higher all night long and looks ready to retest the 113.00 figure if US equities rally into the open. For now, any positive price moves in US stocks will favor the dollar and the commodity currencies leaving euro and cable behind as investors worry about political and economic risks in the region increase.