Article Highlights

  • French trade balance: -€4.4B vs. -€4.2B expected, -€5.1B previous
  • French current account: -€1.8B vs. -€4.1B previous
  • Spanish services PMI: 55.1 as expected vs. 55.3 previous
  • Italians services PMI: 52.1 vs. 51.3 expected, 51.2 previous
  • French final services PMI: revised lower to 50.6 from 50.8
  • German final services PMI: revised lower to 54.5 from 54.6
  • Euro Zone final services PMI: revised lower to 53.1 vs. 53.2 expected, 53.0 originally
  • U.K. construction PMI: 52.0 vs. 54.0 expected, 54.2 previous
  • Euro Zone retail trade y/y: 2.1% vs. 2.7% expected, 2.7% previous
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Price action was a bit choppy during today’s morning London session, but forex traders seem to be taking cues from risk sentiment and commodities for the most part, with the higher-yielding currencies getting kicked lower again.

Major Events/Reports:

Poor U.K. construction PMIMarkit’s U.K. manufacturing PMI reading for April was a real joy-killer for pound bulls since it dropped faster than expected from 54.2 to 52.0 instead of a more modest slide to 54.0. Also, the 52.0 reading is the lowest since June 2013. Commentary from the report blamed the lower reading to “stalling new order volumes,” especially the “lack of momentum in residential building.”

Commodities continue to crumble – Commodities were broadly in the red during the morning London session, with the precious metal gold down by 1.03% to $1,278.45 per troy ounce (despite the risk-off environment) and the base metal copper copper down by 0.99% to $2.197 per pound by the end of the session.

The slide in commodities is likely due to the Greenback’s recent strength after Atlanta Fed President Dennis Lockhart said yesterday that there’s “more probability” of a rate hike “being a real option” for the June FOMC meeting.

Another factor that may be driving commodities lower is continuing disappointment over China’s poor manufacturing PMI readings since industrial metals like copper were leading the way down.

Oil swims against the tide – One notable exception to the commodities crumble is oil since oil benchmarks were steadily grinding their way higher during the morning London session, with U.S. crude oil up by 0.48% to $43.86 per barrel and Brent blend crude oil up by 0.42% to $45.16 per barrel near the end of the session.

Market analysts attributed the higher oil prices to the wildfires in Canada’s oil-rich province of Alberta, which forced some Canadian oil companies to cut production.

Another round of risk aversion – Risk sentiment during the morning London session was rather skittish, with the pan-European FTSEurofirst 300 down by 0.97% to 1,306.10, the Euro Stoxx 50 down by 1.06% to 2,946.50, and the DAX down by 0.85% to 9,842.00.

Meanwhile, U.S. equity future were also in negative territory, so the gloomy sentiment may spill over into the U.S. session, with the S&P 500 futures down by 0.64% to 2,043.75 and the Nasdaq futures down by 0.74% to 4,302.25.

Market analysts pointed out that mining companies were some of the main losers, so it’s probably safe to say that the overall sour mood is due to the slide in commodity prices that I mentioned above, especially the slide in metals.

Major Currency Movers:

JPY – The safe-havens (USD, JPY, CHF) were getting a nice, solid boost from the prevailing risk-off sentiment. And it seems like the Japanese yen was getting the largest boost since it was the one currency to rule them all during the morning London session.

USD/JPY was down by 26 pips (-0.25%) to 106.60, CHF/JPY was down by 29 pips (-0.27%) to 111.56, EUR/JPY was down by 21 pips (-0.18%) to 122.66

GBP – Pound pairs started the morning London session on a slightly weak footing, but got thrown off a cliff when the poor readings for Markit’s U.K. construction PMI came out. The pound’s price action then began to diverge since the pound began trading sideways against the safe-havens while trading steadily climbing higher against the comdolls. It still lost out to all its forex rivals and ended the session as the weakest currency of them all, though.

GBP/USD was down by 40 pips (-0.27%) to 1.4510, GBP/JPY was down by 79 pips (-0.51%) to 154.69, GBP/CHF was down by 36 pips (-0.26%) to 1.3861

CAD – All the higher-yielding comdolls (CAD, AUD, NZD) couldn’t get a break during the morning London session because of the commodities slide and the general risk aversion. But the Loonie is worth mentioning because it was the weakest among the comdolls despite the higher oil prices during the morning London session.

There were no direct catalysts for the Loonie, but it’s possible that forex trades were focusing more on how the wildfires in Alberta will affect the overall Canadian economy rather than the higher oil prices.

USD/CAD was up by 29 pips (+0.23%) to 1.2753, EUR/CAD was up by 46 pips (+0.32%) to 1.4673, NZD/CAD was up by 24 pips (+0.28%) to 0.8803

Watch Out For:

  • 12:15 pm GMT: U.S. ADP non-farm employment survey (195K expected, 200K previous)
  • 12:30 pm GMT: U.S. preliminary unit labor costs (3.3% expected, same as previous)
  • 12:30 pm GMT: U.S. preliminary non-farm productivity (-1.3% expected, -2.2% previous)
  • 12:30 pm GMT: U.S. trade balance (-$41.1B expected, -$47.1B previous)
  • 12:30 pm GMT: Canadian trade balance (-$1.40B expected, -$1.91B previous
  • 1:45 pm GMT: Markit’s final U.S. services PMI (no revision from 52.1 expected)
  • 2:00 pm GMT: U.S. factory orders (0.6% expected, -1.7% previous)
  • 2:00 pm GMT: U.S. ISM non-manufacturing PMI (54.8 expected, 54.5 previous)
  • 2:30 pm GMT: U.S. crude oil inventories (0.6M expected, 2.0M previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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