Every day, I’ll be giving you a recap of all you need to know about what happened during the London Session.
From economic reports to news that rocked the markets, you get a quick review of events that moved the major currencies.
You’ll also see these recaps on Forex Market News- BabyPips.com
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The Swissy was the one currency to rule them all during the morning London session, likely because of fading appetite for risk.
The Greenback, meanwhile, was broadly in retreat. And while the euro was able to capitalize on the Greenback’s retreat, the euro only ranked in third place since it was the Kiwi that claimed the second top spot.
French consumer confidence: steady at 97.0 as expected
Italian consumer confidence: 115.2 vs. 115.9 expected, 116.2 previous
Italian PPI m/m: 0.3% expected, same as previous
Treasury Secretary Steven Mnuchin was interviewed by CNBC very late into the session.
And, well, this was the main takeaway from Mnuchin’s interview:
Mnuchin also said that their objective “is to try to get Canada on board quickly,” which is a good sign for Canada.
However, Mnuchin was quick to add that “this deal is about more trade for U.S. companies and goods and services, and that’s what we’re focused on.” And if the U.S. can’t hammer out a deal with Canada, then the U.S. will just leave Canada behind and proceed with the deal it hammered out with Mexico.
According to a CNN report that cited “Three sources with direct knowledge of the North Korean position on denuclearization” as saying that North Korean officials have supposedly sent a letter to U.S. Secretary of State Mike Pompeo.
The letter allegedly stated that “the U.S. is still not ready to meet [North Korean] expectations in terms of taking a step forward to sign a peace treaty.” Moreover, the unnamed sources supposedly said that denuclearization talks “may fall apart.”
Rumors of the alleged letter are not new since The Washington Post released a similar report yesterday. However, the CNN report does appear to support the Washington Post report, increasing the probability that such a letter does exist.
Most commodities extended their bullish run during the morning London session. And while oil benchmarks were also initially on the rise, they were hit by selling pressure late into the session.
The broad-based rise in commodity prices was likely sustained by the Greenback’s weakness. And just for reference, the U.S. dollar index was down by 0.11% to 94.57 for the day by the end of the session.
Other than that, market analysts also say that easing trade war fears helped to boost demand for base metals like copper.
As to why oil benchmarks were hit by selling pressure near the end, that appears to have been a reaction to a Reuters report that cited Ibrahim al-Muhanna, an advisor to the Saudi Energy Minister, as saying that (emphasis mine):
“Is Iran able or willing to close completely, or even partially, the Strait of Hormuz or Bab Al-Mandab, or both? The answer is no, and a really big no … Current sanctions are unlikely to stop Iranian exports completely.”
Base metals were broadly in the green.
Copper was up by 0.81% to $2.754 per pound
Nickel was up by 0.73% to $13,527.50 per dry metric ton
Precious metals were also in positive territory.
Gold was up by 0.31% to $1,219.80 per troy ounce
Silver was up by 0.38% to $14.915 per troy ounce
Oil benchmarks were in positive territory earlier, but encountered selling pressure late into the session and are now mixed for the day.
U.S. WTI crude oil is already down by 0.22% to $68.72 per barrel after reaching an intraday high of $69.19 earlier
Brent crude oil is still up by 0.34% to $76.77 per barrel for the day but reached an intraday high of $77.14 earlier
The major European equity indices started the day on a strong footing but eventually ran into sellers and began paring their gains. Some were even pushed into negative territory by the end of the morning London session.
Market analysts attributed the earlier risk-on vibes to optimism over the progress in NAFTA talks as well as the commodities rally.
As to why risk-taking appeared to fade late on, that’s not yet very clear. The energy sector was the one that got hit the hardest, though, so retreating oil prices is very likely one of the reasons for the deterioration in risk sentiment. However, oil prices only began to retreat late into the session.
It’s also possible that jitters related to North Korea may have helped to sour sentiment since many of the major European equity indices began to turn south after the CNN report was released.
The pan-European FTSEurofirst 300 was still up 0.03% to 1,509.07 but off the day’s high at 1,513.39
Germany’s DAX was still up by 0.09% to 12,549.99 but off the day’s high at 12,595.95
The blue-chip Euro Stoxx 50 was already down by 0.07% to 3,455.45 after reaching an intraday high of 3,463.25
The Greenback was on the back foot during the morning London session and even happens to be the worst-performing currency of the session.
There were no direct catalysts for the Greenback’s weakness, but market analysts suggest that market players may be unwinding their safe-haven bets because of optimism related to the progress in NAFTA talks.
The Swissy was the top-performing currency of the morning London session and is also currently the top-performing currency of the day (so far).
And Swissy bulls can probably thank the returning risk-off vibes for that since there wasn’t really anything else.
The Kiwi and the euro were in second place and third place respectively. There were a few minor updates for the euro while the Kiwi practically had none. However, it’s likely that the two were just feeding off the Greenback’s weakness.
12:30 pm GMT: U.S. goods trade balance (-$69.0B expected vs. -$67.9B previous)
12:30 pm GMT: Preliminary U.S. wholesale inventories (0.2% expected vs. 0.1% previous)
1:00 pm GMT: S&P Case-Shiller composite U.S. HPI (6.43% expected vs. 6.51% previous)
2:00 pm GMT: CB’s U.S. consumer confidence (126.5 expected vs. 127.4 previous)
2:00 pm GMT: Richmond Fed’s manufacturing index (18 expected vs. 20 previous)
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The Aussie and the euro took a beating during the earlier Asian session and continued to do so during the morning London session. However, the Loonie also joined the loser’s club, despite rising oil prices.
The pound, meanwhile, caught a bid when the morning London session rolled around and steadily steamrolled its peers to claim the top spot.
German GfK consumer climate: 10.5 vs. 10.6 expected, same as previous
French consumer spending m/m: 0.1% vs. 0.3% expected, 0.1% previous
French preliminary GDP q/q: 0.2% as expected, same as previous
Credit Suisse economic expectations: -14.3 vs. -4.0 previous
U.S. and Canada expected to resume trade talks later
The Westpac Banking Corporation announced during the earlier Asian session that it will hike rates on variable home loans by 0.14% to 5.38%, effective September 19.
Westpac CEO Brian Hartzer explained the decision by saying that:
“That [costs] started going up in February, we were hoping that that would go back down, it hasn’t and, after six months at a sustained level, we’ve reluctantly concluded that it’s going to stay at that more elevated rate, and therefore we came to the conclusion that that needed to be reflected in the price of our loans.”
Hiking of variable mortgage rates is not new since some of the smaller Australian banks have already been doing it.
However, Westpace’s move is big news since Westpac is the first of the so-called “big four” banks to raise rates, with three other big banks being the Commonwealth Bank of Australia (CBA), Australia and New Zealand Banking Group (ANZ), and National Australia Bank (NAB).
The move also likely raised expectations that the RBA will be forced to keep rate steady even longer in order not to increase the pressure on consumers and avoid a potential housing market problem.
Italian newspaper La Stampa cited unnamed government sources as saying the following:
“If the ECB covers you, markets can’t speculate because they don’t make money.”
“And in this way the rating agencies can’t downgrade your debt.”
In other words, the Italian government allegedly wants the ECB to buy up Italian bonds, thereby lowering bonds yields and making Italian bonds unattractive for speculators, as well as protecting Italian bonds from ratings downgrades.
The major European equity indices had a repeat of yesterday’s performance in that they had a promoising start but eventually began to turn lower as selling pressure began to win out.
Market analysts were quick to attribute the earlier risk-on vibes to trade-related optimism.
As to why risk appetite appeared to fade later on, market analysts say that was due uncertainty surrounding a potential trade agreement between the U.S. and Canada, as well as profit-taking ahead of the U.S. GDP report for later.
The pan-European FTSEurofirst 300 was still up 0.08% to 1,509.05 but reache an intraday high of 1,512.46 earlier
Germany’s DAX was still up by 0.09% to 12,540.30 but reache an intraday high of 12,566.66 earlier
The blue-chip Euro Stoxx 50 was already down by 0.14% to 3,450.55 after reaching an intraday high of 3,456.65
The Aussie extended its slide from the earlier Asian session and was the biggest loser of the session (and of the day for that matter).
Westpac’s move is still likely weighing on the Aussie. And it probably didn’t help that appetite for risk was fading during the session.
The Loonie was the second weakest currency of the morning London session, which is rather wonky since there were no apparent catalysts and oil was actually on the rise.
Maybe we’re just seeing some profit-taking ahead of trade talks between the U.S. and Canada? The Loonie is the best-performing currency of the week after all, thanks to the recent progress in trade talks.
By the way, you may wanna check out Forex Gump’s Quick Primer & Updates On NAFTA.
The euro got slapped lower during the earlier session when that rumor about Italy asking for ECB support began to make the rounds.
And during the morning London session itself, the euro continued to slide lower without any major negative catalysts. The euro did win out against the Loonie and the Aussie, though.
12:30 pm GMT: U.S. preliminary GDP (downgrade from 4.1% to 4.0% expected) and U.S. GDP price index (no change from 3.0% expected)
12:30 pm GMT: Canada’s current account (-$15.3B expected vs. -$19.5B previous)
2:00 pm GMT: U.S. pending home sales (0.3% expected vs. 0.9% previous)
2:30 pm GMT: U.S. crude oil inventories (-0.7M expected vs. -5.8M previous)
10:45 pm GMT: New Zealand’s building consents (-7.6% previous)
U.S. and Canada expected to resume trade talks later
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The pound pared some of its gains from yesterday and was the worst-performing currency of the session to boot. The risk-off vibes, meanwhile, likely boosted demand for the safe-haven yen.
Other than those, the higher-yielding Aussie and Kiwi are also worth noting since they were both in recovery mode after getting a severe beat-down during the earlier Asian session.
German import prices m/m: -0.2% vs. 0.0% expected, 0.5% previous
KOF Swiss economic barometer: 100.3 vs. 101.3 expected, 101.7 previous
Spanish flash HICP y/y: 2.2% vs. steady at 2.3% expected
German unemployment change: -8K as expected vs. -6K previous
U.K. mortgage approvals: 64.77K vs. 65.00K expected vs. 65.37K previous
U.K. net lending to individuals: £4.0B vs. £5.5B expected, £5.4B previous
Euro Zone business climate: 1.22 vs. 1.26 expected, 1.30 previous
Euro Zone consumer confidence: unchanged at -1.9 as expected
German flash HICP y/y: 1.9% vs. steady at 2.1% expected
E.U. Chief Brexit Negotiator Michel Barnier got some press time earlier during the session.
And while he maintained his positive message from yesterday, he also stressed that the E.U. must be prepared for other possible scenarios, and “That includes the no-deal scenario.”
He also noted that the Irish border issue is the “the most sensitive point” of the negotiations. However, he tried to give it a positive spin by also saying that a solution “is possible.”
German Finance Minister and Vice Chancellor Olaf Scholz gave a speech after Barnier delivered his comments.
And, well, Scholz basically repeated what Barnier had to say since Scholz encouraging businesses to prepare for a disorderly Brexit since it’s unclear if the E.U. can hammer out a Brexit deal with the U.K.
Most commodities were broadly in retreat during the morning London session. Oil was an exception, though, since oil benchmarks added to their gains from earlier.
The slide in commodity prices is likely linked to the Greenback’s rise. In fact, market analysts were attributing the slide in copper prices to the the Greenback’s rise.
And for reference, the U.S. dollar index was up by 0.11% to 94.56 for the day when the session ended.
As to why oil prices didn’t seem to mind the Greenback’s rise, market analysts say that was due to demand for oil prices because of U.S. sanctions against Iran, as well as the draw in U.S. oil inventories.
Base metals were broadly in decline.
Copper was down by 0.79% to $2.715 per pound
Nickel was down by 0.20% to $13,425.00 per dry metric ton
Precious metals were also having a rough day.
Gold was down by 0.11% to $1,210.30 per troy ounce
Silver was down by 0.93% to $14.560 per troy ounce
As mentioned earlier, oil benchmarks were swimming against the bearish tide.
U.S. WTI crude oil is up by 0.66% to $69.97
Brent crude oil is up by 0.72% to $78.02
The major European equity indices were broadly in the red during today’s morning London session, which is a clear sign that risk aversion holds sway once more.
And according to market analysts, the risk-off vibes in Europe were due to some disappointing earnings
results, declining commodity prices, and trade-related concerns surrounding China.
The pan-European FTSEurofirst 300 was down by 0.36% to 1,506.92
Germany’s DAX was down by 0.54% to 12,493.60
The blue-chip Euro Stoxx 50 was down by 0.68% to 3,433.05
The risk-off vibes in Europe also dragged U.S. equity futures lower.
S&P 500 futures were down by 0.16% to 2,910.00
Nasdaq futures were down by 0.18% to 7,654.75
Another sign that risk aversion was the name of the game in Europe was the broad-based decline in global bond yields.
German 10-year bond yield up by 5.88% to 0.384%
French 10-year bond yield up by 2.97% to 0.721%
U.K. 10-year bond yield up by 0.27% to 1.487%
U.S. 10-year bond yield up by 0.25% to 2.875%
Canadian 10-year bond yield up by 0.22% to 2.316%
The pound began to encounter selling pressure when Barnier said that the E.U. must be prepared for a “no-deal” scenario. And more bears came outmaul the pound later on when Scholz essentially repeated what Barnier said.
The yen claimed the top spot (during this session at least), likely because it got a boost from falling bonds yields and the risk-off environment.
12:30 pm GMT: Canada’s monthly GDP growth (0.1% expected vs. 0.5% previous)
12:30 pm GMT: U.S. personal income (0.3% expected vs. 0.4% previous) and personal spending (0.4% expected, same as previous)
12:30 pm GMT: U.S. core PCE price index (0.2% expected vs. 0.1% previous)
12:30 pm GMT: U.S. initial jobless claims (214K expected vs. 210K previous)
5:30 pm GMT: Deutsche Bundesbank President and ECB Member Jens Weidmann will speak
11:00 pm GMT: GfK’s U.K. consumer confidence (unchanged at -10 expected)
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Risk aversion persisted during the morning London session, so the themes from earlier continued to play out, namely demand for the yen and weakness on the part of the higher-yielding Aussie and Kiwi, with the Aussie still getting the worst of it.
The euro is also worth noting since it was actually the second worst-performing currency of the session after the Aussie.
Nationwide U.K. HPI m/m: -0.5% vs. 0.1% expected, 0.7% previous
German retail sales m/m: -0.4% vs. -0.1% expected, 0.9% previous
French preliminary HICP y/y: 2.5% as expected vs. 2.6% previous
Italian jobless rate: 10.4% vs. 10.8% expected, same as previous
Italian preliminary HICP y/y: 1.7% as expected vs. 1.9% previousEuro Zone HICP
Euro Zone HICP y/y: 2.0% vs. steady at 2.1% expected
Euro Zone core HICP y/y: 1.0% vs. steady at 1.1% expected
Jobless rate in the Euro Zone: steady at 8.2% as expected
A bunch of inflation reports for the Euro Zone and its member states were released earlier.
And focusing only on the HICP report for the Euro Zone as a whole, that showed that the Euro Zone’s headline HICP rose by 2.0% year-on-year in August, missing expectations that it would match the previous month’s annual pace of +2.1%.
Despite the miss, the reading is still well above the ECB’s forecast that headline HICP will increase by 1.7% year-on-year in 2018, as reported in the June Eurosystem/ECB Staff Macroeconomic Projections.
Meanwhile, HICP less energy, one of the ECB’s preferred measures for core inflation, ticked lower from +1.4% to +1.3%. But despite the weaker increase, the reading is still actually meeting the ECB’s forecast that HICP less energy will print a 1.3% annual increase by the end of the year.
As for HICP less energy and unprocessed food, another of the ECB’s preferred measures for core inflation, that also weakened from +1.3% to +1.2%. Even so, it’s still beating the ECB’s forecast of +1.1% by the end of the year.
European Commission President Jean Claude Juncker was interviewed earlier. And he said that the U.S. has been respecting the “ceasefire agreement” with the E.U.
However, Juncker warned that if the U.S. decides to slap tariffs on European cars, “then we will also do that.”
That comment was a response to Trump’s comment during a Bloomberg interview wherein Trump said that the E.U.’s trade policies are supposedly “almost as bad as China,” adding that the E.U.’s proposal to scrap auto tariffs is just “not good enough.”
Chinese Foreign Ministry Spokesperson Hua Chunying gave a presser earlier during the session. And she was asked about the report that the U.S. will push trough with slapping imports on $200 billion worth of Chinese goods.
Well, she basically said that China ain’t backing down when she replied as follows:
“The so-called tough and pressureful practices of the US side are of no use to the Chinese side and are not conducive to solving the problem. Those who still believe that China will succumb to intimidation, threats and unwarranted accusations should wake up.”“At the same time, China has always held a consistent attitude and stance on economic and trade frictions: We are committed to properly solving relevant issues through equality, reciprocity, honesty and pragmatic dialogue on the basis of mutual respect. It is believed that this is in the fundamental interests of the relevant parties and is in the common interest of the international community.”
Europe is still being plagued by risk aversion since the major European equity indices are broadly in negative territory.
Market analysts blamed the risk-off vibes on trade-related jitters because of Trump’s tough stance on China, as well as a potential trade conflict between the E.U. and the U.S. after Juncker delivered some retaliatoyr rhetoric to Trump’s comments that the E.U.’s trade policies are supposedly > “almost as bad as China.”
The pan-European FTSEurofirst 300 was down by 0.69% to 1,496.81
Germany’s DAX was down by 0.84% to 12,389.11
The blue-chip Euro Stoxx 50 was down by 0.97% to 3,398.55
U.S. equity futures were also leaking red, so the risk-off vibes may carry over into the upcoming U.S. session.
S&P 500 futures were down by 0.16% to 2,897.50
Nasdaq futures were down by 0.10% to 7,641.75
The yen managed to overpower the Swissy and was the top-performing currency of the session, as well as the biggest winner of the day (so far).
The risk-off vibes likely continued to weigh on the higher-yielding Aussie and Kiwi. The Aussie is still getting the worst of it, though, likely because the RBA’s Corporate plan is also still weighing down on the Aussie.
The euro was hit by selling pressure when Juncker talked about retaliating against the U.S. However, it wasn’t until just before the Euro Zone’s HICP report was released that the euro began to sink broadly lower, so much so that the euro ended up being the second biggest loser of the session.
12:30 pm GMT: Canada’s RMPI (0.0% expected vs. 0.5% previous) and IPPI (-0.4% expected vs. 0.5% previous)
1:45 pm GMT: Chicago PMI (63.0 expected vs. 65.5 previous)
2:00 pm GMT: Revised University of Michigan consumer sentiment (95.5 expected vs. 95.3 previous)
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GBP pairs gapped lower at the start of the week and most of them were unable to fill those gaps during the morning London session, thanks to an influx of sellers due to the U.K.’s disappointing manufacturing PMI report.
Improving risk sentiment, meanwhile, meant that some of the themes from the earlier Asian session were reversed. And most notable among these are the Aussie’s broad-based rise and the yen taking a step back.
Aside from those, the euro is also worth highlighting since it was the second top-performing currency of the session, likely because of relief-buying because of the CBRT’s announcement that it will likely hike rates to keep Turkey’s inflation in check.
The Central Bank of the Republic of Turkey (CBRT) essentially stated that it will likely be hiking this September in order to rein in Turkey’s rather high inflation when the CBRT announced the following earlier:
t’s a brand new month, which means a fresh batch of U.K. PMI reports from Markit.
As usual, the U.K.’s manufacturing PMI report was the first to be released. The report was a disappointment, however, since contrary to expectations that the headline reading will tick higher from 53.8 to 53.9, the actual reading for August came in at 52.8, which is the poorest reading in 25 months!
And the details didn’t really help much since Markit noted that manufacturing output “rose at the slowest pace in 17 months in August.” The slowdown in manufacturing output also led to jobs growth “slumping to near-stagnation” in August.
The future also doesn’t loo too good since “growth of new order inflows eased to its weakest during its current 25-month sequence of expansion” and business optimism “dipped to a 22-month low.” And according to survey respondents, domestic was softer, but “the main drag was the trend in new export orders.”
And as usual, some survey respondents “noted concerns about the ongoing uncertainty about Brexit and the exchange rate.”
On a slightly happier note, “inflationary pressure remained relatively strong in August, with both output charges and input costs rising at above survey average rates.”
Most commodities were broadly in the green during the morning London session. We can’t really point to Greenback strength, though, since the Greenback was mixed during the session and U.S. dollar index is still up by 0.04% to 95.09 for the day.
Market analysts couldn’t really pinpoint a reason for the rise in commodity prices. But with regard to oil, some market analysts say that oil prices were well-supported because of U.S. sanctions against Iran.
Base metals were actually mixed, but most were in the green.
Precious metals were also in positive territory.
And the same can be said of oil benchmarks.
The major European equity indices started the week by opening lower and then plumbing fresh intraday lows.
And according to market analysts, the risk-off vibes were due to risk sentiment spillover from the earlier Asian session.
However, the major European equity indices later began clawing their way back up. And many of them were even able to close out the session in positive territory, which is a sign that risk-taking was the dominant sentiment.
The catalyst for the improvement in risk sentiment is not yet clear. However, it’s likely that the commodities rally helped since the energy sector was already in the green while mining shares are well off their lows.
Financials were also in demand, likely because of relief buying due to the CBRT’s announcement that it will likely hike this September to keep Turkey’s inflation in check. And remember, financials took the brunt of it when Turkey’s problems came to the fore back in August.
The pound’s losses piled up during the morning London session, thanks to the U.K.’s disappointing PMI report.
However, market analysts are still also blaming the pound’s weakness on E.U. Chief Brexit Negotiator Michel Barnier’s comments over the weekend that he’s “strongly opposed” to British PM Theresa May’s Brexit plan.
GBP/USD was down by 45 pips (-0.35%) to 1.2869, GBP/AUD was down by 105 pips (-0.58%) to 1.7858, GBP/NZD was down by 62 pips (-0.32%) to 1.9476
The safe-haven yen erased its earlier gains on most pairs and was the second worst-performing currency of the session after the pound, likely because of the risk-on vibes in Europe.
USD/JPY was up by 21 pips (+0.19%) to 111.12, CHF/JPY was up by 14 pips (+0.12%) to 114.50, CAD/JPY was up by 12 pips (+0.14%) to 85.05
The risk-friendly environment may have been toxic for the yen, but it was paradise for the Aussie. And it probably helped that commodities were on the rise.
AUD/USD was up by 17 pips (+0.24%) to 0.7206, AUD/JPY was up by 34 pips (+0.43%) to 80.73, AUD/CAD was up by 26 pips (+0.28%) to 0.9414
The euro probably enjoyed some relief buying since it was jolted higher after the CBRT announced that it will likely hike rates this September. And remember, the euro was one of the biggest victims of the Turkish lira crisis back in August.
EUR/USD was up by 12 pips (+0.10%) to 1.1611, EUR/JPY was up by 37 pips (+0.29%) to 129.02, EUR/GBP was up by 41 pips (+0.45%) to 0.9021
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The almighty U.S. dollar steamrolled its way to the top spot, apparently because of safe-haven demand. However, the Greenback’s reign was short-lived since the yen eventually outpaced the Greenback and finished the session in first place. The Greenback is still in the lead for the day (so far), though.
The higher-yielding Aussie and Kiwi, meanwhile, were the biggest victims of the risk-off vibes in Europe, with the Kiwi getting the worst of it.
However, the Loonie got a rather strong bearish kick very late into the session, so much so that the Loonie ended up being a bigger loser than the Aussie and even almost lost out to the Kiwi as well.
The U.K.’s latest construction PMI report was released earlier. And unfortunately, that was a disappointment as well since the headline reading came in at 52.9, which is a three-month low. The market was only expecting a slide from 55.8 to 54.9.
A quick read of the report reveals that the details were not too pretty.
For one, the weakness was broad-based since “all three broad categories of activity recording a loss of momentum since the previous month.” And civil engineering construction, in particular, “decreased for the first time in five months.”
Another is that the “latest data indicated that input price inflation edged down to its lowest since July 2016,” which may translate to weaker CPI down the road.
Yet another is that there was “a slowdown in new business growth from July’s 14-month peak.” And according to survey respondents, “Brexit-related uncertainty continued to hold back investment spending.”
But on a somewhat optimistic note, jobs growth in the construction sector “held close to the two-and-and-a-half year peak seen in July” despite weaker construction output.
RBA Guv’nah Philip Lowe gave a speech late into the session. And, well, he dove straight into monetary policy at the start of his speech while saying that interest rates ain’t budging anytime soon when he noted that (emphasis mine):
Lowe also reiterated the RBA’s hiking bias when he recited the RBA’s mantra that:
But as usual, Lowe was quick to add that a rate hike is not forthcoming when he said that (emphasis mine):
Other than that, Lowe also expressed satisfaction that the Aussie has depreciated against the Greenback, saying that (emphasis mine):
Lowe also expressed some concern about about escalating trade tensions, noting that “As a country that has benefited greatly from an open rules-based international system, Australia has a strong interest in this not happening.”
Overall, nothing really too surprising.
After yesterday’s rally, most commodities beat a hasty retreat during the session. Not all commodities were in the red, however, since oil benchmarks were clearly well in the green.
It’s likely safe to attribute the commodities rout to the Greenback’s strength since the U.S. dollar index was up by 0.48% to 95.52 for the day when the session ended. In fact, market analysts were blaming the slide in base metal prices on the Greenback’s strength.
As to why oil didn’t seem to mind the Greenback’s strength too much, market analysts are still attributing that to supply disruptions since tropical storm Gordon has already forced two oil rigs to suspend operations and evacuate personnel from the Gulf of Mexico.
Base metals were down and out for the count.
Precious metals were also in the red despite the risk-off vibes in Europe.
As mentioned earlier, oil benchmarks were swimming against the bearish tide.
The price action of the major European equity indices was a mirror image of yesterday’s price action in that the major European equity indices had a promising start before eventually succumbing to selling pressure, with most already in the red by the end of the session.
And according to market analysts, risk aversion prevailed mainly because of concerns that the U.S. may escalate the ongoing trade war with China by imposing additional tariffs on Chinese goods once the public comment period expires on Thursday.
Disappointing news for British advertising giant WPP and Telecom Italia were also cited for the downbeat vibes since the telecoms sector was the biggest loser of the session.
And to that I’d add the commodities rout since the basic materials sector was the second worst-performing sector, thanks mainly to the poor performance of mining shares.
The Greenback easily dominated its peers and was the one currency to rule them all during the morning London session.
There were no direct catalysts for the Greenback’s strength, but market analysts were saying that the Greenback likely benefited from safe-haven flows (mainly at the expense of emerging market currencies) due to lingering trade war fears.
EUR/USD was down by 19 pips (-0.17%) to 1.1558, GBP/USD was down by 15 pips (-0.12%) to 1.2830, AUD/USD was down by 22 pips (-0.32%) to 0.7181.
The yen also got a piece of the safe-haven action but was initially on the defensive against the Greenback. The yen did eventually overpower the Greenback, however. Although it’s worth pointing out that the Greenback is still the best-performing currency of the day (so far).
USD/JPY was down by 13 pips (-0.12%) to 111.24, EUR/JPY was down by 35 pips (-0.27%) to 128.59, AUD/JPY was down by 33 pips (-0.41%) to 79.90
The higher-yielding Aussie and Kiwi were both under bearish pressure during the session, thanks to the risk-off vibes, the commodities rout, and the Greenback’s strength.
And between the two, it was the Kiwi that was feeling the worst of it.
NZD/USD was down by 30 pips (-0.45%) to 0.6551, NZD/JPY was down by 40 pips (-0.54%) to 72.90, NZD/CHF was down by 14 pips (-0.22%) to 0.6379
The Loonie was initially headed for a mixed finish but was rushed by sellers very late into the session (despite rising oil prices) and finished the session in second-to-last place after the Kiwi. Heck, the Loonie even almost lost out to the Kiwi as well.
There was no apparent reason for the influx of sellers, but some market analysts were blaming the Loonie’s slide on some tweets from Trump over the weekend, namely these:
USD/CAD was up by 52 pips (+0.40%) to 1.3165, EUR/CAD was up by 37 pips (+0.24%) to 1.5217, GBP/CAD was up by 53 pips (+0.31%) to 1.6895.
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There were signs that risk aversion was loosening its grip on Europe, so the safe-haven currencies (USD, CHF, JPY) all pared some of their gains for the day.
And the two currencies that benefited the most from that weakness were the euro and the Kiwi since the two were neck-and-neck for the most part, although the Kiwi eventually pulled ahead to claim the top spot … for now at least.
And while the pound was mixed (but a net loser) during the session itself, it’s worth highlighting since the pound has been under bearish pressure since the earlier Asian session and the U.K.’s better-than-expected services PMI reading wasn’t really able to attract enough buyers to stop the bleeding.
We finally got our hands on the U.K.’s latest services PMI report. And fortunately, the headline reading jumped from 53.5 to 54.3, beating expectations that the reading would only rise to 53.9.
And according to commentary from Markit, “service providers experienced a stronger increase in business activity and incoming new work during August.”
And with regard to jobs growth, Markit found that “The rate of job creation was the fastest since February, reflecting efforts to boost business capacity and meet increased workloads.”
Even better, recruitment of “suitably skilled staff contributed to higher salary payments in August,” which is a promising sign for wage growth.
Markit’s finding on inflation were a bit disappointing, though. Sure, service providers reported “a sharp and accelerated rise in average cost burdens,” thanks partly to higher wages. But despite higher input costs, “intense competitive pressures meant that prices charged inflation was only modest and remained well below the peak seen in November 2017.”
Another disappointing bit is that “business optimism eased to a fivemonth low and remained subdued in comparison to the long-run survey average.”
And as usual, survey respondents blamed “Brexit uncertainty” for their poor expectations and aversion to investing in large-scale projects.
British PM Theresa May spoke in Parliament late into the session. And she had this to say with regard to Brexit:
Reuters claimed in a report earlier that it has supposedly seen a draft of a document from the Christian Social Union (CSU).
And for those who don’t know, the CSU is a sister party of German Chancellor Angela Merkel’s Christian Democratic Union (CDU).
Anyhow, the report cited the CSU as stating the following in the draft:
And in a follow-up report, Reuters also cited the CSU as stating the following on Brexit:
Italian Deputy Prime Minister Matteo Salvini was speaking earlier. And he reassured investors by saying that the Italian government will play nice with the E.U. and follow E.U. fiscal rules when he said that:
Luigi Di Maio, another Italian Deputy Prime Minister, would later give the same reassurances when he said that:
Both Deputy Prime Ministers and other top Italian officials are expected to meet with Prime Minister Giuseppe Conte later to discuss the budget.
The major European equity indices opened lower and then sank even lower for yet another day, which is a sign that risk aversion is still plaguing Europe.
And like yesterday, market analysts were blaming the risk-off vibes mainly on trade-related jitters and concerns over emerging markets.
However, risk aversion appeared to ease during the later half of the session since almost all of the major European equity indices were well off their lows. They’re still deep in negative territory, though.
As to why risk aversion began to ease, that may have been due to optimism related to Italy after the Italian government reassured investors that they’ll play nice and respect E.U. fiscal rules since Italian banks were outperforming despite the prevalence of risk aversion.
The Kiwi was the top-performing currency of the morning London session, very likely because it was feeding off the Greenback’s weakness, although it’s also likely that the higher-yielding Kiwi may have been attracting demand because of signs that risk aversion may be fading.
NZD/USD was up by 17 pips (+0.27%) to 0.6562, NZD/CHF was up by 18 pips (+0.29%) to 0.6396, NZD/JPY was up by 30 pips (+0.42%) to 73.23
The euro barely lost out to the Kiwi and had to content itself with second place.
The euro was likely feeding off the Greenback’s weakness at first since the euro began making its way higher without any direct catalysts.
However, demand for the euro may have then be sustained because of easing Italy-related jitters after top Italian government officials reassured investors. That rumor about the CSU may have also helped in sending the euro higher.
EUR/USD was up by 16 pips (+0.13%) to 1.1579, EUR/JPY was up by 36 pips (+0.28%) to 129.22, EUR/CHF was up by 18 pips (+0.16%) to 1.1287
All the safe-haven currencies (USD, JPY, CHF) were losers during the session, likely because of easing risk aversion. And among them, it was the yen that was the biggest loser of them all.
USD/JPY was up by 15 pips (+0.14%) to 111.59, CAD/JPY was up by 22 pips (+0.26%) to 84.69, CHF/JPY was up by 14 pips (+0.13%) to 114.48
The pound was a net loser during the session, which is rather wonky since the U.K.’s services PMI report was actually better-than-expected.
The pound has been under bearish pressure since the London session even rolled around, though. And according to some market analysts that was due to Brexit-related jitters, although they didn’t really cite a catalyst.
GBP/USD was down by 10 pips (-0.08%) to 1.2820, GBP/CAD was down by 37 pips (-0.22%) to 1.6890, GBP/NZD was down by 72 pips (-0.37%) to 1.9531
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The Aussie was crushed earlier when ANZ and CBA announced that they’ll follow in Westpac’s footsteps by also hiking rates on variable home loans. And the Kiwi was apparently dragged lower in sympathy and because of the risk-off vibes.
However, the two-higher yielding comdolls got some respite during the morning London session, likely because of the risk-on vibes and rising commodity prices, as well the Greenback’s broad-based weakness.
The pound is also noteworthy since it finished the session in third place despite the lack of catalysts. And market analysts attributed the pound’s resilience to Brexit-related speculation, thanks mainly to the Bloomberg report that was released during yesterday’s U.S. session.
Chinese Commerce Ministry Gao Feng had a presser earlier. And he was asked about the likely imposition of tariffs on $200B worth of Chinese goods once the public comment period in the U.S. expires later today.
And, well, Gao Feng replied by giving the following warning to the U.S.
Most commodities were in rally mode during the morning London session. And we can probably thank the Greenback’s overall weakness for that since a weaker U.S. dollar means that globally-traded commodities (priced in USD) become relatively cheaper, especially for market players who hold non-USD currencies.
In fact, market analysts were attributing the demand for base metals such as copper on the Greenback’s weakness. Market analysts also attributed the demand for precious metals like gold on the Greenback’s weakness.
Anyhow, the U.S. dollar index was down by 0.05% to 95.03 for the day by the end of the session. It was actually in the green earlier.
Base metals were well in the green.
Precious metals were also in high demand.
Oil benchmarks didn’t fare as well but were also in the green.
The major European equity indices had a wobbly start, but most of them eventually found support and even closed out the session modestly higher, which implies that risk-taking was the more dominant sentiment in Europe.
And according to market analysts, sentiment improved in Europe because of positive updates for French engine maker Safran and Italian utilities company Enel.
However, those same market analysts noted that gains were limited because of lingering concerns over emerging markets, as well as trade-related jitters since the public comment period on slapping tariffs on $200B worth of Chinese goods will expire today.
The higher-yielding Aussie and Kiwi were both in recovery mode during the session. In fact, the Aussie was the top-performing currency of the session, but the Kiwi was a close second. And AUD and NZD bulls can probably thank the recovery in risk sentiment, the Greenback’s weakness, and rising commodity prices for that.
NZD/USD was up by 17 pips (+0.26%) to 0.6594, NZD/JPY was up by 15 pips (+0.20%) to 73.40, NZD/CAD was up by 16 pips (+0.19%) to 0.8696
AUD/USD was up by 27 pips (+0.38%) to 0.7196, AUD/JPY was up by 25 pips (+0.31%) to 80.09, AUD/CAD was up by 28 pips (+0.30%) to 0.9489
All the safe-havens (USD, JPY, CHF) were actually feeling some bearish pressure during the session. However, it was the Greenback that was the weakest currency of the morning London session.
There weren’t any apparent catalysts for the Greenback’s weakness, but market analysts were pointing to the possible unwinding of safe-haven bets because of the risk-friendly vibes in Europe, as well as demand for the pound (at the Greenback’s expense).
USD/CHF was down by 12 pips (-0.12%) to 0.9694, USD/JPY was down by 9 pips (-0.08%) to 111.29, USD/CAD was down by 11 pips (-0.10%) to 1.3185
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Today’s another NFP Friday, so trading conditions were relatively tight and most currency pairs were milling about in tight ranges.
The pound and the euro were exceptions, though, since the pound spurted higher across the board, while the euro got pummeled broadly lower.
Today is another U.S. non-farm payrolls (NFP) Friday! And under normal circumstances, volatility and directional movement are usually in short supply as traders brace themselves for the NFP report.
And today was certainly a very normal day since most currency pairs were milling about in tight ranges.
By the way, if you’re planning to trade the NFP report, then you may wanna check out Forex Gump’s Event Preview for the upcoming NFP report.
And while you’re at it, you may also wanna check out Forex Gump’s Event Preview for Canada’s jobs report since that will be released simultaneously with the NFP report.
Earlier, the U.K. House of Commons released the transcript of their talks with E.U. Chief Brexit Negotiation Michel Barnier back on Monday.
And after quickly scanning the transcript, the overall message appears to be a softer and conciliatory stance on Barnier’s part.
As for specifics, Barnier said that the E.U. is “open” and wants an “unprecedented relationship” with the U.K., but is also ready if Brexit talks fail:
However, Barnier stressed that the E.U. doesn’t want a “no-deal” scenario and wants to have free trade with the U.K. that’s “very wide in scope“:
Barnier did say that Ireland is a major sticking point, though. He even warned that “if there is no operational backstop on Ireland, there will not be an agreement.”
However, Barnier did try to sound a bit more conciliatory when he also said that (emphasis mine):
Italian Economy and Finance Minister Giovanni Tria was speaking earlier today. And he reiterated the Italian government’s vow to follow the E.U.’s budget rules, while also stating that Italy will respect its commitments to Europe.
The major European equity indices opened mostly higher. However, it soon became apparent that risk aversion was still prevalent since the major European equity indices began erasing their gains and most were even in the red by the end of the session.
And as usual, market analysts were blaming trade-related jitters for the risk-off vibes. Although it’s also probable that markets were just skittish because of the NFP report.
The pound was initially range-bound but got rushed by buyers about halfway through the session.
And according to market analysts and price action, the catalyst for the bullish injection was the transcript of Barnier’s discussion with the U.K. Parliament.
GBP/USD was up by 50 pips (+0.39%) to 1.2987, GBP/JPY was up by 82 pips (+0.58%) to 143.94, GBP/CHF was up by 58 pips (+0.47%) to 1.2541
The euro found buyers early on, thanks to assurances from Tria that Italy will play nice with the E.U. There was little follow-through buying, though, and most EUR pairs began to trade sideways.
Unfortunately (for EUR bulls), the euro later got swamped by sellers about halfway through the session. There were no direct, negative catalysts for the euro, but profit-taking is a possibility since the euro is currently a net winner.
However, it’s also probable that the euro weakened because market players were dumping their euro positions and flocking to the pound since the euro began to encounter sellers at about the same time as the pound began to shoot higher.
EUR/USD was down by 30 pips (-0.26%) to 1.1609, EUR/NZD was down by 53 pips (-0.30%) to 1.7648, EUR/GBP was down by 66 pips (-0.74%) to 0.8930
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The euro caught a bid when the morning London session rolled around and was even able to claim the top spot of the session, likely because of Italy-related optimism.
The euro did have a hard time against the higher-yielding Aussie and Kiwi, though, likely because the two higher-yielding currencies were also in demand due to the risk-friendly vibes during the session.
Speaking of risk sentiment, the risk-friendly environment may have been great for the higher-yielders, but it was toxic for the safe-havens, with the Swissy getting the worst of it, so much so that the Swissy was the biggest loser of the session and is also the biggest loser of the day (so far).
Other than those, the pound is also worth noting since it moved higher at the start of the session even though there were no apparent catalysts. Some market analysts were pointing to short-covering, though.
In any case, the pound then got a bullish boost because of net positive U.K. data but got slapped lower when Theresa May’s spokesman announced a meeting on Thursday to discuss preparations for a “no-deal” Brexit. And that slap allowed the Kiwi and Aussie to outpace the pound, so the pound ended up mixed (but a net winner) for the session.
The Office for National Statistics (ONS) released a slew of economic of report for the U.K. earlier.
And first up is the U.K.’s July Index of Production report, which showed that total industrial production in the U.K. only increased by 0.1% month-on-month in July. Moreover, the market was expecting a stronger 0.2% increase. But on a happer note, the increase in July does mark the third consecutive month of growth.
Looking at the details, the 0.2% fall in manufacturing output and the 0.7% drop in water and waste management output were the main culprits for the weaker-than-expected reading. And the main reason why total industrial production was still in positive territory is the 3.3% in mining and quarrying output.
Moving on to U.K.’s July construction output report, that revealed that construction output in the U.K. increased by 0.5%, beating expectations for a 0.4% increase. And according to the report, construction activity was “driven predominantly by a 4.0% increase in new private housing work,” which is a good sign for the U.K. housing market.
Up next is the U.K.’s July trade report. And that showed that the U.K.’s trade deficit narrowed from £10.7 billion to £10.0 billion, which is great because the consensus was that it would widen to £11.7 billion.
Even better, the smaller deficit was due to total exports growing by 2.0%, which was only partially offset by the 0.4% increase in imports.
And finally, we have the U.K.’s July GDP report, which showed that the British economy expanded by 0.3% month-on-month, which is a tick faster than the expected 0.2% increase, and a solid start for Q3 2018.
This brings the three-month moving average to 0.6%, which is the best reading since August 2017. The year-on-year reading also looks good since that came in at +1.6%, which is faster compared to July’s annual reading of +1.3%.
As already mentioned earlier, total industrial production was a disappointment. However, the GDP report showed that services rose by 0.3%. And that plus the 0.5% increase in construction output were more than enough to offset the weakness in industrial output.
There were some Brexit-related headlines during the session. And first up is this tweet from E.U. Chief Brexit Negotiator Michel Barnier.
That’s the good news. The bad news is that Former U.K. Junior Brexit Minister Steve Baker said earlier that British PM Theresa May’s Conservative Party may suffer a “catastrophic split” at the Sept. 30 – Oct. 3 Conservative Party conference since 80 Conservative MPs (out of 315) supposedly want to rebel against Theresa May’s leadership.
In other news, Theresa May’s spokesman announced earlier that Theresa May and her top people will meet on Thursday supposedly to “discuss preparations for a possible ‘no deal’ Brexit,” as a Reuters report put it.
The major European equity indices had a wobbly start but they quickly got their act together and began charging broadly higher, which is a clear sign that risk-taking was the dominant sentiment in Europe.
And according to market analysts, the banking sector outperformed largely because of strong demand for Italian banks due to the surge in demand for Italian bonds.
And Italian bonds were in demand, market analysts say, because of Italian Economy and Finance Minister Giovanni Tria’s comment over the weekend that:
And to give that comment some context, I noted in last week’s EUR recap that the euro had a good run last week (before the selloff on Friday), thanks to positive comments from Italian government officials, promising that they’ll place nice with the E.U. by following the E.U.’s budget rules, which eased political uncertainty and revived demand for Italian assets.
Well, what Tria is saying here is that if the Italian government will follow the E.U.’s budget rules, then he predicts that Italian bond yields will drop.
The euro was the biggest winner of the morning London session and is also currently the second top-performing currency of the day (so far), losing out only to the higher-yielding Aussie.
There weren’t any direct catalysts, but we’re probably seeing an extension of last week’s theme, namely demand for the euro because of the Italian government’s conciliatory tone towards the E.U.
EUR/USD was up by 40 pips (+0.35%) to 1.1571, EUR/JPY was up by 57 pips (+0.45%) to 128.55, EUR/CHF was up by 79 pips (+0.71%) to 1.1269
The Swissy parted ways from the euro and is currently on the opposite end of the spectrum since the Swissy was not only the weakest currency of the morning London session, but is also the biggest loser of the day (so far).
The safe-haven Swissy was very likely weakened by the risk-on vibes in Europe. And market analysts specifically blamed the Swissy’s weakness on the strong demand for Italian bonds.
USD/CHF was up by 35 pips (+0.36%) to 0.9737, GBP/CHF was up by 79 pips (+0.63%) to 1.2596, AUD/CHF was up by 44 pips (+0.65%) to 0.6932
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Battle lines were clearly drawn between the safe-haven currencies and the higher-yielders during the morning London session. And among the safe-haven currencies (USD, CHF, JPY), it was the yen that emerged as the champion.
The Aussie, meanwhile, was the biggest loser of the session, likely because the apparent trigger for today’s bout of risk aversion was a report that China is asking for permission from the WTO to impose sanctions against the U.S.
As for the other currencies, the euro is worth noting since it was the third biggest loser of the session after the Aussie and Kiwi, likely because it was reeling from the Greenback’s strength.
And while the pound was mixed for the session, it’s also worth highlighting since it tossed and turned when the U.K.’s net positive jobs report was released. No clear reason why, but it’s possible that some GBP bulls were using the jobs report and the Greenback’s strength as an excuse to unwind some of their positions.
The Office for National Statistics (ONS) released the U.K.’s latest jobs report earlier during the session.
And that revealed that the jobless rate in the three months to July held steady at 4.0%, which is the best reading “since December 1974 to February 1975” and is in-line with expectations.
However, the number of people who claimed unemployment benefits rose by 8.7K in August, exceeding expectations for a 6.9K increase. Worse, the previous reading was revised from 6.2K to 10.2K.
But on a happier note, average weekly earnings surged by 3.1% year-on-year in July, which is the best reading since December 2017. And the strong reading in July meant that the three-month average comes in at 2.6%, beating expectations that it would hold steady at 2.4%.
And while the 1.9% increase in bonuses did help to drive wage growth, underlying wage growth was also actually strong.
If we strip the 1.9% increase in bonuses to get regular wages, then regular wages still grew by 3.1% (+2.8% previous), which is the strongest increase since July 2015.
Wage growth also seems to be keeping up with inflation since real wages grew by 0.8% year-on-year in July.
And if we only focus on real regular earnings, then that also increased by 0.8%, marking the sixth consecutive month of growth.
According to reports, a September 21 meeting agenda from the WTO was published earlier and it stated that the WTO’s dispute settlement body will hear China’s request for permission to impose tariffs on the U.S. for anti-dumping violations.
And to give that news its proper context, the case is actually old since China started the dispute proceedings way back on 2013 and received a favorable decision from the WTO back in 2017.
The U.S. was given until August 22 of this year to comply with the WTO’s decision. However, the U.S. openly admitted on August 27 that they haven’t fully complied, which is why China is asking for permission to punish the U.S.
Whoop-dee-doo!
In his speech before Parliament, British Chancellor of the Exchequer Philip Hammond said that BOE Guv’nah Mark Carney is willing to stay on as the BOE’s final boss character until January 2020 (that’s 7 extra months).
And in a letter from Carney that was read by Hammond, Carney explained his willingness to stick around as follows:
The major European equity indices were bleeding red during the morning London session, so risk aversion has finally made a comeback it seems.
And according to market analysts, the feelings of gloom and doom in Europe were due to renewed trade war fears as focus shifts back to the ongoing trade war between the U.S. and China.
U.S. equity futures were also down in the dumps, which implies that the risk-off vibes may spillover into the upcoming U.S. session.
There was a three-way battle for domination between the yen, the Swissy, and the Greenback, thanks to the risk-off vibes during the session. There can be only one champion, however, and that happens to be the yen.
The higher-yielding Aussie lost out to the Kiwi and was the biggest loser of the session, likely because it was getting extra selling pressure since the catalyst for the risk-off vibes in Europe was China-related.
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After taking a beating during the earlier Asian session, the Aussie and the Kiwi had a good run during the session. Heck, the Aussie was even able to claim the top spot of the morning London session and is now a net winner for the day (so far).
And Aussie and Kiwi bulls can probably thank the risk-friendly vibes in Europe for that, as well as rising commodity prices and the Greenback’s tumble at the start of the session.
The pound, meanwhile, was the biggest loser. The pound was actually mixed at first since it won out against the safe-havens and the euro but lost ground against the comdolls.
However, the pound was hit by late selling pressure. And there were apparently enough sellers to wipe out the pound’s gains against the safe-havens and the euro, forcing to pound to limp to the finish line in last place.
And while the euro was mixed for the session, it’s worth highlighting since it initially had a promising start, likely because of the Greenback’s weakness. However, it began to find sellers after an ECB-related rumor made the rounds at around 8:40 am GMT.
According to a Bloomberg report, unnamed “officials familiar with the [ECB’s] latest projections” claim that the ECB will announce a downgrade for its Euro Zone growth forecasts tomorrow, with trade-related concerns being cited as the reason for the bleaker outlook.
Moreover, the ECB may also change the language for its growth outlook from “broadly balanced” to signal an increase in downside risks.
However, the unnamed officials were also cited as saying that the ECB’s inflation projections are supposedly “largely unchanged” as the Bloomberg report puts it.
The BBC released a report early on, claiming that 50 members of the European Research Group, a pro-Brexit Conservative party research group, have supposedly discussed “how best you game the leadership election rules,” apparently in order to oust Theresa May from the British PM position.
An unnamed Conservative Party MP who was present at these discussions was also cited as saying that the group discussed “possible scenarios over the Autumn,” adding that “everyone I know says she has to go.”
The BBC report also cited another unnamed source as saying that “people feel the leadership is out of touch and has lost the plot.”
European Commission President Jean-Claude Juncker gave a speech a little over an hour after the BBC report was released. And he had this positive thing to say about the U.K.:
However, he also took jabs at Theresa May’s Brexit proposals, particularly with regard to their future economic relationship.
Juncker also reiterated the E.U.’s position that the Irish border issue is a major sticking point that the E.U. refuses to budge on:
Former Brexit Secretary David Davis was interviewed by the Evening Standard late into the session and after Juncker gave his speech.
And referring to Juncker’s statements which rejected Theresa May’s proposals (a.k.a. “Chequers” proposal), Davis explained that:
The major European equity indices had a wobbly start but they soon regained their footing and began marching slowly but broadly higher, so risk-taking was apparently the dominant sentiment in Europe.
And market analysts say that the major European equity indices were taking cues from rising commodity prices since mining and energy shares were the biggest winners, although deal-making activity was also cited as another reason for the risk-friendly vibes in Europe.
Trade-related jitters were still likely weighing down on sentiment, though, since most of the major European equity indices slowly trimmed some of their gains near the end.
GBP pairs (except GBP/AUD) jumped higher at the start of the session. And market analysts attributed that to Juncker’s comment that the U.K. “will never be an ordinary third country.”
There was little follow-through buying, however, since Juncker also said some not-too-friendly things. And so the pound’s price action became mixed after that.
And the pound was headed for a mixed finish at first. However, sellers rushed the pound at around 10:00 pm GMT, so the apparent catalyst was David Davis’ interview with the Evening Standard.
Some market analysts also cited the BBC report about plans to oust Theresa May, but that report was released at around 6:00 pm GMT, so I’m not too sure about that.
GBP/USD was down by 5 pips (-0.04%) to 1.2998 but reached an intraday high of 1.3047 earlier, GBP/JPY was down by 9 pips (-0.06%) to 144.91 but reached an intraday high of 145.42 earlier, GBP/AUD was down by 41 pips (-0.23%) to 1.8270 but reached an intraday high of 1.8322 earlier
The higher-yielding Aussie was the biggest winner of the morning London session, likely because of the risk-friendly vibes, rising commodity prices, and the Greenback’s weakness at the start of the session.
The Aussie did pare some of its gains when signs of risk aversion returned later on. Even so, it managed to hold onto most of its gains and is now even a net winner for the day (so far).
AUD/USD was up by 18 pips (+0.26%) to 0.7115, AUD/JPY was up by 16 pips (+0.21%) to 79.32, AUD/CHF was up by 15 pips (+0.22%) to 0.6927
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Trading conditions were rather subdued during the morning London session. And many currency pairs were just milling about in tight ranges.
There were some themes playing out, though, namely the yen’s overall poor performance, likely because of the risk-on vibes in Europe.
The pound is also noteworthy and is arguably the only real mover of the morning London session since it trended broadly higher before the BOE statement, but got slapped lower across when the BOE finally announced its monetary policy decision.
The pound was able to hang onto its gains, however, so it was the best-performing currency in what was a mostly steady session.
The BOE’s MPC released the minutes for their latest monetary policy huddle late into the session.
And the main takeaways are:
And if you want more, then below are some of the more important and/or interesting points in, well, bullet points for easier reading (emphasis mine):
As widely expected, the ECB stated in its official press statement that no changes were made to the current monetary policy.
The refinancing rate is is therefore unchanged at 0.00%, while the marginal lending rate is steady at 0.25%. As for the deposit rate, that’s still at -0.40%.
The ECB also reaffirmed that its QE program will continue at a monthly pace of €30 billion until the end of this month, and will then continue at a reduced monthly pace of €15 billion until the end of December 2018.
And after December, the ECB reaffirmed its forward guidance that “net purchases will then end,” provided that “incoming data [confirms] the [ECB’s] medium-term inflation outlook.”
As for interest rates, the ECB reiterated its forward guidance that:
Overall, nothing really new. Market players are now sitting tight for what ECB Overlord Draghi has to say in the ECB presser. And if you didn’t know, you can watch the ECB presser live by clicking here, if you’re interested.
The BOE and the ECB weren’t the only central banks that were under the spotlight since the Central Bank of the Republic of Turkey (CBRT) also got some attention, thanks to the CBRT’s decision to hike rates in order to rein Turkey’s inflation.
The major European equity indices had another good run today. And market analysts say that the risk-friendly vibes in Europe were sustained by easing trade tensions on earlier news that the U.S. and China will try to have a meeting of the minds again.
The pound caught a bid just before the morning London session rolled around and then continued to steadily trend higher across the board.
There weren’t any apparent catalysts, but some market analysts were pointing to the more general theme of growing hopes for a Brexit deal.
Of course, preemptive positioning ahead of the BOE statement is also a possibility. And all the more, since the pound reacted to the BOE statement by weakening across the board, even though the BOE didn’t really say anything too surprising and still has a hiking bias.
GBP/USD was up by 12 pips (+0.09%) to 1.3047 but reached an intraday high of 1.3068 pre-BOE, GBP/JPY was up by 28 pips (+0.20%) to 145.57 but reached an intraday high of 145.76 pre-BOE, GBP/CHF was up by 14 pips (+0.11%) to 1.2651 but reached an intraday high of 1.2669 pre-BOE
The safe-haven yen was nudged broadly lower and was the worst-performing currency of the morning London session, likely because of the risk-friendly vibes in Europe.
USD/JPY was up by 11 pips (+0.10%) to 111.55, EUR/JPY was up by 12 pips (+0.09%) to 129.67, CHF/JPY was up by 12 pips (+0.11%) to 115.08
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There wasn’t much on the docket during the morning London session, but that doesn’t mean that the session was totally devoid of action, since the higher-yielding comdolls and the safe-haven currencies were fighting it out.
Risk-taking prevailed at the start, so the higher-yielding Aussie and Kiwi had the initial advantage, while the safe-havens yen and Swissy were on the receiving end of a beat-down.
However, the tables were later turned when appetite for risk began to fade. And in the end, the safe-havens were the ones dishing out the pain against the higher-yielders.
Aside from the battle between the higher-yielders and the safe-havens, the euro is also worth noting since it had a promising start but began to encounter sellers after Smets’ comments and closed out the session as a net loser.
The pound is also noteworthy since it was rushed by sellers late into the session, apparently because of a Financial Times report.
ECB Member and Belgian Central Bank Governor Jan Smets was speaking earlier and he touched upon the ECB’s language during yesterday’s ECB statement and presser.
As for specifics, Smets stressed that normalizing the ECB’s monetary policy would be a “very gradual process.”
And he basically reiterated the ECB’s position that it (the ECB) doesn’t want to tighten monetary policy too quickly to because:
According to a Financial Times report that was released late into the sesion, Emily Thornberry, a Labour MP and Shadow Foreign & Commonwealth Secretary, reportedly said that a workable Brexit deal was “just not going to happen” under Bitish PM Theresa May’s leadership.
The report also quoted Thornberry as saying that Labour will vote against any Brexit deal. And that will supposedly oust Theresa May from the PM position before Christmas.
The major European equity indices opened higher and then climbed even higher, which is a sign that risk-taking was the name of the game in Europe.
However, the major European equity indices later began to encounter broad-based selling pressure, forcing them off their respective intraday highs.
Market analysts attributed the risk-on vibes to trade-related optimism, as well as the Apple-inspired demand for tech shares.
As for the later signs of fading appetite for risk, market analysts only noted that the major European equity indices pared their gains, but couldn’t really pinpoint a catalyst.
The Swissy and the yen were the top-performing currencies during the session, apparently because of the fading appetite for risk. There can only be one champion, though, and that happened to be the Swissy.
Both the Aussie and Kiwi showed promise when the morning London session rolled around.
Sadly for the two higher-yielding comdolls, risk appetite began to sour, so both currencies were forced to give back some of their gains from the earlier session and were the biggest losers of the morning London session to boot.
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The European currencies (CHF, GBP, EUR) battled for supremacy during the morning London session, with the Swissy ultimately coming out on top, even though there were signs that risk aversion was easing.
The yen, meanwhile, was the biggest loser of the session, likely because of the rise in bond yields.
Chinese Foreign Ministry Spokesperson Geng Shuang gave a presser earlier. And he was asked about the validity of a Wall Street Journal report that claimed that China may pull out of trade talks if the U.S. decides to go ahead and impose additional tariffs on Chinese goods.
And, well, Geng Shuang didn’t really answer the question but he did warn that China will retaliate if the U.S. does impose fresh tariffs on Chinese goods when he said that (emphasis mine):
For his part, U.S. President Trump tweeted the following some time after Geng Shuang’s presser.
The Bundesbank (Germany’s central bank) released its monthly report about halfway through the session. And it noted that the German economy didn’t do too well recently, mainly because of weaker vehicle production.
However, the report also noted that (translated from German):
According to a report from Corriere Della Sera, Italian Economy Minister Giovanni Tria would meet later today with Prime Minister Giuseppe Conte and Deputy Prime Ministers Matteo Salvini and Luigi Di Maio.
And the topic of their meeting will supposedly be the budget. More importantly, the report claimed that Tria is supposedly determined to keep Italy’s 2019 budget within 1.6% of GDP, thereby reducing the risk of roiling financil markets, and contrary to the coalition government’s plans to increase spending.
Investors apparently welcomed this news since demand for Italian bonds ramped up, market analysts say.
The major European equity indices opened the new trading week on a weak footing. However, most of them eventually regained their footing and began to retrace their steps. Some were even already in positive territory by the end of the session, which heavily implies that risk aversion prevailed but is beginning to fade.
Market analysts attributed the risk-off vibes to risk sentiment spillover from the earlier Asian session, namely the WSJ article over the weekend about Trump’s to announce additional tariffs on Chinese goods by today.
As to why risk aversion appeared to ease as the session progressed, market analysts attributed that to positive results and strong demand for defensive stocks such as utilities and telecoms.
However, it’s also likely that the report from Corriere Della Sera that I mentioned earlier also helped to improve sentiment since the financial sector made an impressive recovery, thanks largely to strong demand for Italian banks.
Another sign that risk aversion may be fading is the broad-based rise in global bond yields. In fact, the only one in the red among the major Euro Zone economies is Italy, thanks to that report from Corriere Della Sera that I mentioned earlier.
The Swissy managed to score small wins against the euro and the pound and was therefore the best-performing currency of the morning London session.
It’s not really clear why the Swissy was in strong demand, though, since there were signs that risk aversion was fading in Europe. However, it’s also possible that lingering trade-war jitters may have spurred safe-haven demand for the Swissy.
The pound edged out a win against the euro to claim second place. And market analysts were pointing to a report from The Times about Barnier’s efforts to resolve the Irish border issue.
The yen was the biggest loser of the morning London session, very likely because of fading risk aversion and higher global bond yields.
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The higher-yielding Aussie and Kiwi were forced to give back some of their gains from the earlier session, likely because of the returning risk-off vibes in Europe.
The safe-haven currencies (USD, JPY, CHF), meanwhile, were initially in a three-way race for the top spot.
However, the euro was rushed by buyers late into the session. And buying pressure was strong enough that the euro was able to quickly outpace all the safe-havens to pull off an upset victory.
China’s Ministry of Commerce issued a statement earlier. And the Ministry was basically saying that China will retaliate against the fresh round of tariffs. However, specific measures weren’t mentioned.
Fortunately, Chinese Foreign Ministry Spokesperson Geng Shuang held a presser later on, so journalists jumped on the opportunity to ask for more details.
Unfortunately, Geng Shuang also refrained from divulging any of the deets, saying only that “China will naturally announce it when appropriate.”
Geng Shuang was also asked if trade talks are now off the table, and he replied as follows:
Despite the earlier news that the U.S. slapped fresh tariffs on Chinese goods, the major European equity indices actually had a running start, thanks to some relief buying and because a “sell the rumor, buy the news” scenario played out, market analysts say.
However, sellers eventually began to return and most of the major European equity indices began giving back their gains after China announced that it will retaliate against the U.S.
The euro was initially on track to closing out the session as a net loser. Fortunately for the euro, it found buyers across the board at around 10:00 am GMT and quickly erased its losses (and then some). Heck, the euro was even the top-performing currency of the morning London session.
As to what enticed euro bulls to jump in, that’s not yet very clear since there were no apparent catalysts and market analysts were only pointing out that the euro was in demand without really citing a reason.
EUR/USD was up by 7 pips (+0.06%) to 1.1706, EUR/AUD was up by 42 pips (+0.26%) to 1.6251, EUR/NZD was up by 33 pips (+0.19%) to 1.7752
Both the higher-yielding Aussie and Kiwi are still net winners for the day (so far). However, they encountered sellers and were the biggest losers of the morning London session.
And China’s announcement that it will retaliate against U.S. tariffs appears to be the direct catalyst since the Greenback (and Swissy and yen) jumped when that announcement was made, but the Aussie and Kiwi got rather noticeable bearish kicks.
AUD/USD was down by 13 pips (-0.18%) to 0.7203, AUD/JPY was down by 23 pips (-0.28%) to 80.76, AUD/CHF was down by 17 pips (-0.25%) to 0.6923
NZD/USD was down by 5 pips (-0.09%) to 0.6593, NZD/JPY was down by 14 pips (-0.19%) to 73.92, NZD/CHF was down by 9 pips (-0.15%) to 0.6337
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The pound jumped higher across the board near the start of the session, thanks to the U.K.’s better-than-expected CPI report. However, GBP bears returned with a vengeance after The Times released a report claiming that Theresa May will reject Barnier’s proposal to resolve the Irish border issue.
The higher-yielding Aussie and Kiwi, meanwhile, were still in demand, likely because of the risk-on vibes in Europe.
The safe-haven currencies (USD, JPY, CHF) are also worth noting since they were all under bearish pressure, with the Swissy getting the worst of it. In fact, the Swissy is THE biggest loser of the session since the pound’s late slump wasn’t enough to totally erase the pound’s gains against the Swissy.
Other than those, the euro is also worth highlighting since it closed out the session mixed but a net loser. And from the looks of it, the euro was also a victim of that report from The Times, although the euro also appears to have been taking hits because of Di Maio’s comments.
The Office for National Statistics (ONS) released the U.K.’s August CPI report earlier.
And according to the report, headline CPI increased by 0.7% month-on-month, beating expectations for a 0.5% monthly increase.
Year-on-year, CPI rose by 2.7%, which is the strongest reading in six months and is contrary to expectations that the annual reading will decelerate slightly from +2.5% to +2.4%.
More importantly (for rate hike junkies), the +2.7% reading is well above the BOE’s forecast that CPI will increase by 2.4% year-on-year in August, as laid out in the BOE’s August 2018 Inflation Report.
A closer look at the details of CPI report also shows that the stronger headline reading’s was broad-based since 11 of the 12 CPI components printed positive numbers. And of those 11 CPI components, 6 printed stronger annual increases, while only 3 printed weaker readings and the rest maintained the previous month’s pace.
The Times released a report late into the session. And according to the report, British PM Theresa May will supposedly reject E.U. Chief Brexit Negotiator Michel Barnier’s “improved” proposal for the Irish border issue.
The report also cited an unnamed “senior government source” as saying that Theresa May will reject Barnier’s proposal because the E.U. still insists that “Northern Ireland be treated as a separate customs jurisdiction from the rest of the United Kingdom,” which goes beyond the U.K.’s “red line“.
Italian Deputy Prime Minister and 5-Star Movement Head Luigi Di Maio was interviewed earlier. And he said that:
He was referring here to the coalition government’s plans to increase spending, lower taxes, and provide a guaranteed income for poor Italian citizens, which would mean a higher budget deficit.
Other than that, he also said that (emphasis mine):
By the way, if you wanna know more why Italy’s 2019 budget has been garnering attention lately, then you may wanna check out Forex Gump’s Why All The Buzz About Italy’s 2019 Budget?
Earlier today (just before the London session rolled around), BOJ Shogun Kuroda held a presser on the BOJ’s most recent monetary policy announcement.
And, well, Kuroda reiterated that inflation is still low, so he repeated the BOJ’s mantra that:
Kuroda was also asked if the BOJ has any plans to exit its super loose monetary policy, to which Kuroda replied as follows:
The major European equity indices had a soft start and hesitated for a while. However, it soon became apparent that risk-taking was the more dominant sentiment since most of the major European equity indices eventually began inching their way higher.
And according to market analysts the prevalence of risk appetite in Europe was due to demand for mining shares and expectations that the U.S. and China will still sit and reason together, despite the recent escalation in the ongoing trade war.
However, those same market analysts also noted that there were lingering trade-related fears, which is why gains were capped.
The pound jumped higher across the board and claimed the top spot when the U.K.’s CPI report surprised to the upside.
Unfortunately for the pound, bears returned and mauled the bulls when Brexit-related jitters ramped up after The Times released a report claiming that Theresa May will reject Barnier’s proposal for solving the Irish border issue.
Dip demand on the pound was noticeable, though, since GBP bulls were trying to push the pound back up after the rumor-induced drop. Still, the damage was already done.
GBP/USD was down by 4 pips (-0.04%) to 1.3148 but reached a session high of 1.3215 earlier, GBP/NZD was down by 18 pips (-0.09%) to 1.9902 but reached a session high of 1.9994 earlier, GBP/AUD was down by 32 pips (-0.18%) to 1.8129 but reached a session high of 1.8233 earlier
The higher-yielding Aussie and Kiwi continued to rake in gains during the morning London session, likely because of the risk-friendly environment in Europe.
AUD/USD was up by 10 pips (+0.14%) to 0.7251, AUD/JPY was up by 13 pips (+0.17%) to 81.47, AUD/CHF was up by 34 pips (+0.49%) to 0.7021
NZD/USD was up by 4 pips (+0.06%) to 0.6604, NZD/JPY was up by 5 pips (+0.07%) to 74.20, NZD/CHF was up by 26 pips (+0.41%) to 0.6395
All the safe-haven currencies (USD, JPY, CHF) were feeling a bit under the weather during the session, likely because of the risk-on vibes in Europe.
However, the Swissy was noticeably much weaker, so much so that the pound’s late slump was not enough to erase the Swissy’s losses against the pound, which means that the Swissy was the biggest loser of the session (and of the day for that matter).
Maybe the SNB was sneakily weakening the Swissy?
USD/CHF was up by 33 pips (+0.35%) to 0.9683, EUR/CHF was up by 42 pips (+0.38%) to 1.1311, GBP/CHF was up by 41 pips (+0.33%) to 1.2728
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The pound got a lift from the get-go, thanks to easing Brexit-related jitters due to Lidington’s comments.
However, the pound would later strap on and ignite its booster rockets when the U.K.’s retail sales report surprised to the upside, allowing the pound to claim the top spot, not just of the morning London session, but of the day (so far) as well.
In other news, another bout of risk-taking in Europe helped to sustain demand for the higher-yielding Aussie and Kiwi, while applying bearish pressure on all the safe-havens (USD, JPY, CHF).
Interestingly enough, the Greenback, not the Swissy, was the weakest currency of the session, even though the SNB repeated its pledge (or threat) to intervene in the forex market and weaken the Swissy.
And that’s probably because the Swissy was trying to track the euro higher since even the Aussie and the Kiwi began ceding ground to the Swissy near the end of the session.
Conservative Party MP and Cabinet Office Minister David Lidington was interviewed just as the London session started rolling.
And he gave this very juicy soundbite:
Lidington was also asked if he sees a deal by October or November of this year and he replied as follows:
The Office for National Statistics (ONS) released the U.K.’s August retail sales report earlier.
And it revealed that headline retail sales volume in the U.K. increased by 0.3% month-on-month, which is great news since the market was expecting a 0.2% decrease.
The previous headline reading was also upgraded from +0.7% to +0.9%. And a closer look at the details show that most retail store types saw an increase in retail sales volume in August. Only the food stores, clothing stores, and petrol stations reported monthly declines in sales.
And that’s why the core reading also surprised to the upside by printing a 0.3% increase as well (-0.2% expected).
The annual headline reading is also impressive since retail sales volume increased by 3.3% year-on-year, which is a significantly stronger reading compared to the expected 2.3%.
And as icing on the cake, the previous annual reading was also revised higher from +3.5% to +3.8%.
As widely expected (and as usual), the Swiss National Bank (SNB) announced that it was maintaining its current monetary policy.
The target range for the Libor rate is therefore still between -1.25% and -0.25%, with the median target rate at -0.75%. The interest rate on sight deposits was also steady at -0.75%.
The SNB also pointed out that “the Swiss franc has appreciated noticeably, against the major currencies as well as against emerging market currencies.”
And since the Swissy is still “highly valued,” the SNB renewed its promise (or threat) to “remain active in the foreign exchange market as necessary” (cough currency manipulator cough) since weakening the Swissy and the SNB’s negative rates “remain essential in order to keep the attractiveness of Swiss franc investments low and thus ease pressure on the currency.”
Other than that, the SNB also upgraded its GDP growth forecast for 2018 to “between 2.5% and 3%,” thanks to stronger-than-expected GDP growth in Q2, as well as the “favorable” outlook presented by leading indicators. The SNB was projecting GDP to only grow by 2.0% during the June SNB statement.
As for inflation, the SNB’s inflation forecast for 2018 was unchanged at 0.9%, but it downgraded its 2019 inflation projection yet again (0.8% vs. 0.9% previous). The SNB also downgraded its inflation projection for 2020 from 1.6% to 1.2%.
And the SNB bluntly stated that “the new conditional [inflation] forecast lies below the June forecast as a result of the appreciation in the Swiss franc.”
SNB Overlord Thomas Jordan was interviewed after the SNB announced its monetary policy decision. And Jordan jumped on the opportunity to try and jawbone the Swissy by blaming the SNB’s unchanging monetary policy stance on the Swissy’s appreciation.
Almost all of the major European equity indices were glowing gamma green during the session, so risk-taking was apparently still the name of the game in Europe.
And according to market analysts, today’s bout of risk-taking was due to positive corporate news and growing hopes that the U.S. and China may be able to settle their differences and ultimately end the ongoing trade war.
The pound started the session running, thanks to easing Brexit-related jitters, with Lidington’s comment being cited by market analysts as the catalyst for the pound’s rise.
However, demand for the pound would really ramp up later on, thanks to the U.K.’s better-than-expected retail sales report. And buying pressure was so strong that the pound easily steamrolled its peers (including the higher-yielders) to claim the top spot, not just of the morning London session, but of day (so far) as well.
GBP/USD was up by 126 pips (+0.96%) to 1.3278, GBP/JPY was up by 138 pips (+0.94%) to 148.95, GBP/CAD was up by 129 pips (+0.76%) to 1.7127
The euro has actually been climbing higher on most pairs since the earlier Asian session.
And while it initially had a harder time against the Aussie and Kiwi, the euro was able to stand its ground against the higher-yielders, while also taking ground from everything else (except GBP).
But even the Aussie and Kiwi were later forced to bend the knee when the euro got a bullish boost near the end of the session.
There was no apparent reason for the euro’s rise during the earlier Asian session and there’s still no apparent catalysts for the euro’s rise during today’s morning London session.
However, it’s likely that the euro is just feeding off the Greenback’s weakness since the euro started getting buyers at around the same time that the Greenback started to weaken.
EUR/USD was up by 75 pips (+0.64%) to 1.1758, EUR/JPY was up by 79 pips (+0.61%) to 131.89, EUR/CAD was up by 64 pips (+0.43%) to 1.5165
Another risk-friendly day in Europe, so another day of bashing the safe-havens. And this time, it was the Greenback that got the worst of it.
As to why the Greenback’s on the back foot, unwinding of safe-haven bets is the likely reason since easing trade-related jitters as a reason for the risk-friendly vibes. Other market analysts are of the same opinion.
USD/JPY was down by 4 pips (-0.04%) to 112.16, USD/CAD was down by 29 pips (-0.23%) to 1.2896, USD/CHF was down by 43 pips (-0.45%) to 0.9623
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