Article Highlights

  • UK CPI m/m: 0.1% as expected vs. -0.1% previous
  • UK CPI y/y: -0.1% as expected, same as previous
  • UK core CPY y/y: 1.1% vs. 1.0% expected, 1.0% previous
  • UK HPI y/y: 6.1% vs. 5.4% expected, 5.5% previous
  • UK RPI y/y: 0.7% vs. 0.9% expected, 0.8% previous
  • Euro Zone ZEW economic sentiment: 28.3 vs. 30.1 previous
  • German ZEW economic sentiment: 10.5 vs. 6.0 expected, 1.9 previous
  • German ZEW current conditions: 54.4 vs. 55.2 expected, 55.2 previous
  • Fonterra dairy auction currently underway
  • US CPI readings on tap
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Today was another action-packed morning London forex session, thanks to the prevailing risk-on sentiment. Naturally, the higher-yielding currencies were able to give the safe-havens a mighty good bashing.

Major Events:

Risk appetite plants its flag deep – There was a lot of risk-taking during the European session, with the pan-European FTSEurofirst 300 up by a very solid 2.09% to 1,491.30 and the DAX up by 1.91% to 10,917.50. US equity futures were enjoying the risk-on sentiment as well, with the S&P 500 futures up by 0.49% to 2,058.00 and the NASDAQ futures up by 0.50% to 4,582.38.

Some analysts attributed the risk appetite to investors betting that the Paris attacks would have little effect on the European economy. Meanwhile, other analysts pointed to a surge in Greek stocks after an earlier deal between Greece and its creditors with regard to financial reforms.

UK October CPI – As expected, the United Kingdom’s consumer prices index increased by 0.1% month-on-month during the October period while the annualized reading fell by 0.1% in October, same as back in September.

Regarding the negative annualized reading, the details of the report show that most components had positive contributions to CPI, but they weren’t able to overcome the negative contributions from the transport (-0.39%), food & non-alcoholic beverages (-0.30%), and recreation & culture (-0.05%) components.

Overall, there weren’t any major surprises, though, since BOE officials already warned that annualized CPI would continue to hover close to zero in their latest MPC meeting minutes as well as in November’s Inflation Report.

Major Currency Movers:

Comdolls – The risk-taking in the European equities market spilled over into the forex market, with the high-yielding comdolls (AUD, NZD, CAD) as the main beneficiaries and the safe-havens (USD, CHF, JPY) as the main victims.

Among the comdolls, the Aussie got the most lovin’ from forex traders, probably because the Kiwi wasn’t as attractive given the possibility of another negative outcome for Fonterra’s global dairy auction.

As for the Loonie, it was actually the weakest among the comdolls, likely because of declining oil prices amidst concerns over global oversupply, with Brent crude oil down by 0.58% to $44.30 per barrel and US crude oil down by 1.07% to $41.30 per barrel.

AUD/USD was up by 31 pips (+0.45%) to 0.7115, AUD/NZD was up by 25 pips (+0.23%) to 1.0989, AUD/CAD was up by 38 pips (+0.40%) to 0.9482

NZD/USD was up by 18 pips (+0.28%) to 0.6477, NZD/JPY was up by 22 pips (+0.28%) to 79.84, NZD/CHF was up by 23 pips (+0.35%) to 0.6556

USD/CAD was down by 10 pips (-0.09%) to 1.3320, CAD/CHF was up by 16 pips (+0.21%) to 0.7602, CAD/JPY was up by 7 pips (+0.07%) to 92.51

GBP – Most pound pairs started the forex session on a weak footing, probably because of speculation that the UK will be printing a downside surprise for its October CPI readings. However, a downside surprise was surprisingly absent since the CPI readings came in as expected, causing a relief rally among most pound pairs. And the prevailing risk-on sentiment probably helped to pump up demand for the higher-yielding pound as well.

GBP/USD was up by 25 pips (+0.17%) to 1.5210, GBP/CHF was up by 48 pips (+0.31%) to 1.5404, GBP/JPY was up by 29 pips (+0.14%) to 187.44

Watch Out For:

  • Fonterra Global Dairy Trade currently underway; auction usually ends by 2:00 pm GMT; previous auction ended at 1:41 pm GMT; keep an eye on the Kiwi
  • US headline (0.2% expected, -0.2% previous) and core (0.2% expected, 0.2% previous) CPI readings at 1:30 pm GMT
  • US industrial production (0.1% expected, -0.2% previous) and capacity utilization (77.5% expected, 77.5% previous) at 2:15 pm GMT
  • US NAHB builders survey (expected to remain steady at 64.0) at 3:00 pm GMT; this gauges the level of home sales and acts as a leading indicator for the US housing market
  • RBA Assistant Governor Guy Debelle will join the Bloomberg Summit in Sydney at 10:15 pm GMT

See also:

Asia Session Recap

U.S. Session Recap

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