Forex today: "what a day!"

Forex today, well, in the words of one of the editors, Eren, sums it up nicely,

"What a day!"

The day started out as any normal day in the markets, with a handful of economic data to keep track on and an ear to the ground kept for Fed speakers or political developments while on watch for geopolitical tensions that could intensify, and that is exactly what we got, but boy did the headlines drive a two-way response on trading desks today. 

Indeed, it was a headline driven session, kicking off with a slightly more dovish testimony from certified and incoming new Fed chairman, Powell, squashing US yields and the dollar, despite being hawkish on the front end saying that, "it is time to be normalizing interest rates".

The 10-year note benchmark struggled between 2.32% and 2.33% for most of the day, while the yield for the 30-year note also hovered around its previous close of 2.76%. DXY was up +0.35% at the close within the range of 92.827 - 93.245. 

The UK was also grabbing the headlines in early trade with multiple news, albeit conflicting and offering mixed messages to the market, claiming that the UK and EU had finally come to an agreement on the so-called, "divorce-settlement figure". Both The Finacial Times and The Telegraph were hitting the wires first claiming that sources had confirmed the news, sending cable on a tear from 1.3231 to 1.3371. However, within the same stream of headlines, a British government official told Reuters that they were not recognizing the newspaper's (the Telegraph) account of Brexit negotiations, sending sterling lower to 1.3262 before further confirmations were released that indeed there had been an agreement drafted in pencil. The Telegraph came with, "According to several diplomats familiar with the talks, the UK would assume EU liabilities worth up to €100bn although net payments, discharged over many decades, could fall to less than half that amount." Markets now await May to formally present the offer next week as part of a potential deal on citizens rights and the border with Northern Ireland.

Once the market had settled down a little on that fiasco, that sent EUR/GBP through the floor, dragging the euro along for the ride vs the greenback, headlines regarding N.Korea confirming that the 'secret-state' nation had indeed fired a missile towards Japan and that PM ordered emergency cabinet meeting sent markets into another flurry of concern. The safe havens caught a short-lived bid, with the yen, gold and Swissy all marking up points until yet further headlines took over as the driver of flows. Just as soon as the N.Korean headlines took the front pages, news that there were further roadblocks to the tax reform bill making any progress was quickly squashed by the fact that Senate Republicans finally emerged from a lunch at the Capitol with President Trump and were more optimistic that they were moving closer to an agreement on the path forward for passing their tax legislation, subsequently, yields rallied, as did stocks to all-time highs, ( S&P 500 up 0.5% and DJIA up 0.6%), and the dollar caught a strong bid again. USD/JPY ended around 111.40, 20 pips shy of session highs, euro 1.1845, 20 pips above session lows, cable 1.3350, 30 pips below session highs and as for the antipodeans, AUD/USD still traded heavy closing around 0.76 the figure and the Kiwi closed at 0.69 the figure having been as high as 0.6945 and off lows of 0.6896. "In Canada, a slightly more sanguine view on financial risks by the BoC saw rates decline 2-4bps across the curve. Elsewhere moves in yields were milder. In commodities, oil continued to trade weaker ahead of OPEC," explained analysts at ANZ.

As far as data was concerned, the analysts at ANZ wrapped the US session's numbers up as follows: "US Consumer confidence jumped to a 17-year high in November. Both current conditions and future expectations rose. Inflation expectations dipped back to 4.5%, but the three-month average was stable at 4.7%. The net share of consumers saying that jobs are plentiful compared with hard to get increased to 20.2 - the highest level since 2001. On the equity market, 46% of people expect stocks to increase, with only 19% expecting prices to decrease, the lowest level since 2003. Additionally, at +30, the Richmond Fed survey spiked to the highest level since 1993."

Key events ahead in Asia

Grant Spencer, RBNZ deputy governor will speak after the releases of Japanese retail sales data. 

Key notes

• S.Korean Military: N.Korea fired 1 ballistic missile from South Pyongan Province.
• Britain agrees to liabilities worth €100bn but will aim to pay less than half - Financial Times.
• UK government official: Don't recognise Telegraph' account of Brexit negotiations.
• Fed’s Powell: Recent weak inflation readings are ‘surprising’.
• Fed's Powell: I expect gradual interest rate hikes to continue.
• Fed's Powell: Case for raising interest rates at next meeting is coming together.
• Fed's Powell: It is time to be normalizing interest rates.