- German retail sales m/m: -0.9% vs. 0.9% expected, -1.4% previous
- French flash HICP m/m: 0.3% as expected vs. 0.1% previous
- French flash HICP y/y: 0.0% as expected vs. -0.1% previous
- German jobless rate” 6.1% vs. steady at 6.2% expected
- German unemployment change: -11K vs. -5k expected, -16K previous
- Euro Zone jobless rate: steady at 10.2% as expected
- Euro Zone flash HICP y/y: -0.1% as expected vs. -0.2% previous
- Euro Zone flash core HICP y/y: 0.8% as expected vs. 0.7% previous
There was volatility aplenty, but forex price action was a bit wonky during today’s morning London session, probably because of month-end flows.
Commodities slide lower – Commodities were mostly in the red during the morning London session, with the precious metal gold down by 0.33% to $1,212.70 per troy ounce and the base metal copper down by 0.57% to $2.102 per pound. As for oil benchmarks, they were mixed, with U.S. WTI crude oil up by 0.45% to $49.55 per barrel while Brent blend crude oil was down by 0.40% to $50.16 per barrel.
Risk aversion returns – There was a noticeable lack of risk-taking in European markets during the session, with the pan-European FTSEurofirst 300 down by 0.44% to 1,368.57, the blue-chip Euro Stoxx 50 down by 0.39% to 3,079.00 and the DAX down by 0.32% to 10,300.00 by the end of the morning London session.
The risk-off environment also dragged down U.S. equity futures, but they were able to hold on to some of their gains by the of the session, with the S&P 500 futures index up only by 0.05% to 2,098.25 and the Nasdaq futures index up slightly by 0.10% to 4,514.62.
Market analysts couldn’t pinpoint the reason for the returning risk aversion, but it was likely due to end-of-month profit-taking and/or rebalancing. Although falling commodity prices may have dampened appetite for risk as well.
Month-end flows? – It’s last trading day of the month, so some month-end capital flows are to expected as hedge funds, mutual funds, pension funds, and other large players rebalance their portfolios and/or prepare to make cash distributions. Also, month-end flows help to explain the rather wonky price action during the session.
Major Currency Movers:
AUD & NZD – The Aussie and the Kiwi were getting a boost during the morning London session, even though risk aversion was the dominant risk sentiment and commodities were retreating. There weren’t any direct catalysts for the two higher-yielding comdolls, but it’s possible that European players were just pricing-in the positive economic reports from the earlier session. It’s also possible that we’re just seeing some wonky price action due to month-end flows.
AUD/USD was up by 25 pips (+0.25%) to 0.7260, AUD/JPY was up by 18 pips (+0.23%) to 80.60, AUD/CHF was up by 10 pips (+0.14%) to 0.7184
NZD/USD was up by 33 pips (+0.50%) to 0.6752, NZD/JPY was up by 29 pips (+0.40%) to 74.98, NZD/CHF was up by 18 pips (+0.28%) to 0.6682
GBP – The pound was already falling way before the morning London session opened, likely because forex traders took a better look at the newest ORB survey and concluded that it wasn’t as great as it initially looked because the “remain” camp’s lead narrowed to only 9 percentage points (51% remain vs. 42% leave, 7% undecided), a significant downgrade from the previous ORB survey which showed that the “remain” camp had a 20-point advantage (58% remain vs. 38% leave, 4% undecided).
The pound’s price action began to diverge about halfway through the session, though, since it continued to lose out to the comdolls, particularly the Kiwi and the Aussie, while recovering against the safe-havens.
GBP/USD was up by 9 pips (+0.06%) to 1.4644 with 1.4568 as session low, GBP/NZD was down by 97 pips (-0.45%) to 2.1678, GBP/AUD was down by 62 pips (-0.30%) to 2.0166
USD – All the safe-haven currencies (USD, CHF, JPY) were under bearish pressure during the session, which is another reason to say that price action was rather wonky since risk aversion was the dominant market sentiment, as I noted earlier. Among the safe-havens, the Greenback was getting the worst of it. There weren’t any apparent catalysts, though, which reinforces the idea that month-end flows are driving price action.
USD/CAD was down by 19 pips (-0.15%) to 1.3025, USD/CHF was down by 23 pips (-0.23%) to 0.9894, USD/JPY was down by 13 pips (-0.12%) to 111.01
- 12:30 pm GMT: Canadian GDP (-0.1% expected, -0.1% previous)
- 12:30 pm GMT: U.S. personal income (0.4% expected, 0.4% previous)
- 12:30 pm GMT: U.S. personal spending (0.7% expected, 0.1% previous)
- 12:30 pm GMT: U.S. core PCE price index (0.2% expected, 0.1% previous)
- 1:00 pm GMT: S&P Case-Shiller U.S. HPI (5.11 expected, 5.38 previous)
- 1:45 pm GMT: Chicago PMI (50.5 expected, 50.4 previous)
- 2:00 pm GMT: U.S. CB consumer confidence (96.3 expected, 94.2 previous)
- 10:45 pm GMT: New Zealand’s overseas trade index (0.9% expected, -2.0% previous)
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
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