11 October 2016 at 11:29 GMT
GBPUSD continues to slide and is well on the way to establishing a new normal south of 1.25 as the post-flash-crash embers dig into the ailing currency.
Speaking of embers, Samsung's suffered a 9% fall in its stocks after scrapping its 'red-hot' Galaxy Note 7 model. Apple's shares have risen in the meantime as it watches from the sidelines.
Oil meanwhile is taking something of a pause as some sober reflection of Russian president Vladimir Putin's willingness to push for a deal on oil sets in.There are some odd going-ons in South Africa too after the resignation of the finance minister sent ZAR down 3.1% against dollar.
- Canada Sept Annualized Housing starts (190K exp.) (1215 GMT)
- US September Labor Market Conditions Index (1400 GMT)
It's a dollar supportive day in general where USD is outperforming the rest. Main theme is higher US yields piling on the pressure especially on currencies with high current account deficits (CAD, AUD, emerging markets etc). In the EURUSD space, the pair is again lower than the 200-day moving average and now below the psychological level of 1.11, where EURUSD has been above since August 9. 1.1109 area is the 61% fibo level from the rally in EURUSD that started at the end of July. So worth noting if we manage to close the day below that and more importantly below 1.1100.
GBP continues to be pressured by both the stronger USD and politics in UK, where fear of a hard Brexit has taken the currency some 5% down from the levels of the post Conservative Party Conference. With GBP having flash crashed last Thursday it remains tough to be convinced that now is the time to go long.
JPY is weaker on the back of higher US yields. If the Bank of Japan is fixing 10-year yields near zero, that should also add to JPY weakness in this environment. USDJPY is above the 100-day moving average at 103.48, and is the first technical support of note. Resistances of September 2 at 104.31 are the first decent technical resistance.
FX Options volatilities
EURUSD at-the-money vols are trading sideways so far this morning, but with a bias towards greater demand for EUR puts. GBP vols are trading a touch higher as GBPUSD spot traded below 1.2300. There was a 1-month GBPUSD at +0.5 vol this morning. South Africa’s finance minister has been accused of fraud and USDZAR spot was up 2.5-3.0% and 1-month USDZAR atm also jumped 2-3 vols to 22.0.
European stock markets were generally flat as gains in the shares of major luxury goods companies offset the impact of weaker bank stocks.
FTSE100 rose 0.10% to 7,104, Cac40 was up 0.12% to 4,502,while Dax and IBEX35 were flat.
LVMH Moet Hennessy Louis Vuitton lead the gains (5.16%) after releasing its 9-month results beating the forecast showing an acceleration in third-quarter sales. Rivals such as Christian Dior, Richemont and Burberry also advanced.
The StoxxEurope 600 banks index fell 0.47% — the worst-performing sector in Europe.
Energy shares began to drift lower as oil prices eased.
Movers: Samsung was down 9% as the company reported it would discontinue permanently the Galaxy Note 7 Smartphone.
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Brent has been rising after Russia also said it was
ready to join a production cut deal. Photo: iStock
— Edited by Martin O'Rourke