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Risk appetite started on shaky footing on the back of an explosion in the U.K., but the tides soon turned in favor of higher-yielding currencies despite a lack of economic catalysts.

  • Explosion in Manchester, U.K. causes dip for GBP, surge for JPY
  • Japan’s flash manufacturing PMI dips from 52.7 to 52.0
  • Japan’s all industries activity declines by 0.6% vs. 0.4% slip expected, 0.7% gain in February

Major Events/Reports:

Explosion in Manchester kills 22, injures 60

Risk appetite started on shaky footing as an explosion outside Ariana Grande’s concert at the Manchester Arena killed at least 22 concert-goers and caused multiple injuries.

A U.S. official said that suicide bombing is the “likely” reason for the attack, though Manchester’s top police officer confirmed that police were treating as a “terrorist incident” until they know otherwise.

If confirmed as a terrorist incident, the explosion would be the deadliest attack in Britain by militants since four British Muslims killed 52 people in suicide bombings on London’s transport system in July 2005.

The attack came just weeks before a U.K. election where Prime Minister Theresa May is expected to breeze through. Some are speculating that the government is considering rescheduling the elections, while others point out that the effect of the explosion is minimal.

Police believe that the suicide bomber/terrorist also died in the attack.

Angela Merkel: EUR “too weak”

Earlier today Chancellor Angela Merkel pointed to the euro being “too weak” as reason for Germany’s strong trade surplus.

In panel discussion with secondary school students in Berlin, Merkel explained that “The euro is too weak — that’s because of ECB policy — and so German products are cheap in relative terms.” She also added that lower oil prices is another reason (that’s out of the government’s control) for the surplus.

The euro’s rally – which started gaining momentum over the dollar’s weakness – got extended as market players speculated that Merkel’s comments would pressure the ECB some more into considering tapering its easy monetary policies.

Major Market Mover(s):

JPY

With no other major catalysts, the “safe haven” yen raked in pips after the explosion in the U.K. Its gains were limited, however, by poor Japanese data and a tepid Japanese equities markets performance.

USD/JPY hit a session low of 110.86 before recovering to 111.18, EUR/JPY dropped to 124.60 before rising back up to 125.04, and GBP/JPY dropped to 144.05 before finishing the session 24 pips lower (-0.17%) to 144.32.

GBP

The pound had been sliding ever so slightly against its major counterparts on Brexit concerns, but the selloff got a boost after the explosion in Manchester.

GBP/USD capped the session 18 pips lower (-0.14%) to 1.2980, EUR/GBP popped up by 18 pips (+0.21%) to .8664, and GBP/AUD dropped by 53 pips (-0.31%) to 1.7335.

EUR

The common currency extended its rally across the board thanks to Merkel hinting that the euro is “too weak.”

EUR/USD is up by 8 pips (+0.07%) to 1.1245, EUR/JPY gained another 5 pips (+0.04%) to 125.04, and EUR/CHF inched 5 pips higher (+0.05%) to 1.0942.

Watch Out For:

  • 6:00 am GMT: Switzerland’s trade balance (2.87B CHF expected, 3.10B CHF previous)
  • 6:00 am GMT: Germany’s final GDP (q/q) expected to remain at 0.6%
  • 7:00 am GMT: French flash manufacturing PMI (55.2 expected, 55.1 previous)
  • 7:00 am GMT: French flash services PMI (56.8 expected, 56.7 previous)
  • 7:30 am GMT: German flash manufacturing PMI (58.0 expected, 58.2 previous)
  • 7:30 am GMT: German flash services PMI (55.5 expected, 55.4 previous)
  • 8:00 am GMT: German IfO business climate (113.1 expected, 112.9 previous)
  • 8:00 am GMT: Euro Zone flash manufacturing PMI (56.5 expected, 56.7 previous)
  • 8:00 am GMT: Euro Zone flash services PMI (56.5 expected, 56.4 previous)
  • 8:30 am GMT: U.K. government net borrowing (8.0B GBP expected, 4.4B GBP previous)
  • 9:00 am GMT: U.K. inflation report hearings
  • 10:00 am GMT: CBI realized sales (12 expected, 38 previous)