Market Drivers February 11, 2019
Dollar dominates week's open
Swissie hits a mini flash crash
Nikkei closed Dax 1.00%
Europe and Asia:
UK GBP GBP 1.3% vs. 1.4%
UK GBP MP -2.1% vs. 1.1%
UK GBP Trade Balance -12.10B vs.-12.0B
Dollar dominated the open at the start of weeks trade rising across the board and finally breaking above the key 110.00 resistance level in USDJPY as lower rates in Europe and ongoing troubles with Brexit negotiations send traders into the greenback.
In Europe, the marked slowdown in economic activity and increased fears that global trade is decelerating markedly pushed 10-year bund yields below 10 basis on Friday. Yields were up today but the massive yield differential between USTs and Bunds is starting to take its toll on EURUSD which drifted within a whisker of the 1.1300 figure in early European trade.
The biggest showing of dollar strength was in the USDJPY pair which finally broke through the key resistance level of 110.16 in early Frankfurt dealing and now looks ready to make a run towards 112.00. To be sure there are several political risks that could trip up the rally, most glaring of all is the prospect of another government US shutdown on Friday. For now however, the markets remained in a generally upbeat mood with higher equities and yields helping USDJPY trade firmly above the 110.00 figure for now.
On the economic front, UK GDP printed at 1.3% versus 1.4% eyed and both Manufacturing and Industrial Production numbers missed their mark as well. Cable dipped below 1.2900 on the news, but the markets anticipated the prospect of weak data as all business investment in Q4 had essentially come to a standstill over Brexit uncertainty. The pair remained near the lows of the day in after news trade but continues to be supported on assumption that some sort of a Brexit deal will emerge. For now, the 1.,2800 figure remains the main support for the pair and a break there would suggest that bulls are starting to capitulate on the benign Brexit scenario.