Article Highlights

  • U.K. Nationwide HPI m/m: 0.2% vs. 0.3% expected, 0.2% previous
  • Swiss retail sales y/y: -1.95 vs. -1.6% previous
  • Swiss manufacturing PMI: 55.8 vs. 54.0 expected, 54.7 previous
  • German final manufacturing PMI: 52.1 vs. unchanged at 52.4 expected
  • French final manufacturing PMI: 48.4 vs. unchanged at 48.3 expected
  • Euro Zone final manufacturing PMI: unchanged at 51.5 as expected
  • U.K. manufacturing PMI: 50.1 vs. 49.6 expected, 49.4 previous
  • BOE net consumer credit: £1.3B vs. £1.6B expected, £1.8B previous
  • BOE mortgage approvals: 66.3K vs. 67.9K expected, 70.3K previous
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Risk aversion was the name of the game during the morning London session, although the pound also got kicked lower, probably because of poor data and a not-so- impressive Brexit-related poll.

Major Events/Reports:

Positive U.K. manufacturing PMI – Markit’s U.K. manufacturing PMI reading saw an unexpected bounce back above the 50.0 stagnation level. It’s still a relatively weak reading, though, since it came in at 50.1, but at least it beat the expected 49.6 reading, as well as the previous month’s upwardly revised 49.4 reading (49.2 originally). Commentary from the report noted that the higher reading for the May period was due to stronger domestic demand, which was able to offset the fifth consecutive month of falling overseas demand. The PMI report also noted that both input and output costs increased, which is good news for inflation.

U.K. credit data disappoint – The BOE released its credit data for the April period and it was a disappointment overall. Net consumer credit increased by £1.3 billion in April, smaller than the expected increase of £1.6 billion and the previous month’s £1.8 billion increase, which could mean softer consumer spending. In addition, the number of mortgage approvals in the U.K. came in at 66.25K, which is smaller than the expected 67.9K, as well as March’s 70.3K figure. This could imply that the housing market in the U.K. cooled in April.

Commodities tumble – Commodities continued drifting broadly lower during the morning London session, with the base metal copper down by 1.60% to $2.062 per pound. Oil benchmarks were also bleeding out, with U.S. crude oil down by 1.36% to $48.43 per barrel and Brent crude oil down by 1.40% to $49.19 per barrel. Gold was up by 0.14% to $1,219.15 per troy ounce, though, probably because of the risk-off vibes during the session.

Anyhow, market analysts generally blamed the broad-based slide in commodity prices to the subdued Chinese manufacturing PMI readings that were released during the earlier session, which makes sense since weak manufacturing PMI readings could mean weak demand for commodities. Market analysts also pointed to possible speculation ahead of the OPEC meeting tomorrow for the lower oil prices.

Risk aversion domination – Risk aversion was strong during the morning London session, with the pan-European FTSEurofirst 300 down by 0.90% to 1,351.31, the blue-chip Euro Stoxx 50 down by 1.05% to 3,031.00, and the DAX down by 0.85% to 10,176.00 by the end of the session. Even U.S. equity futures were in the red, with the S&P 500 futures index down by 0.38% to 2,087.00 and the Nasdaq futures index down by 0.34% to 4,508.75.

Market analysts noted that mining and travel stocks were the main losers, so the decline in commodities that I mentioned earlier was likely weighing down on risk sentiment, as well as the U.S. State Department’s issuance of a travel alert for all of Europe amidst threats of possible terror attacks.

Major Currency Movers:

CHF & JPY – The prevalence of risk aversion during the morning London session sent market players into the sweet embrace of the Swissy and the Japanese yen since they’re both considered safe-haven currencies. Although it’s also possible that European forex traders were pricing in Japanese Prime Minister Shinzo Abe’s postponement of a sales tax hike to October 2019.

EUR/JPY was down by 39 pips (-0.32%) to 122.03, AUD/JPY was down by 45 pips (-0.57%) to 79.41, CAD/JPY was down by 44 pips (-0.53%) to 83.66

EUR/CHF was down by 8 pips (-0.08%) to 1.1051, AUD/CHF was down by 22 pips (-0.31%) to 0.7191, CAD/CHF was down by 22 pips (-0.29%) to 0.7575

GBP – The pound was weak at the get-go and ended up as the weakest currency of session. It’s not exactly clear what was driving the pound’s forex price action, but the poor BOE credit readings that I mentioned earlier could have been the catalyst.

It’s also possible that forex traders were disappointed by YouGov’s latest poll since it showed that the “remain” and “leave” camps were neck and neck at 41% each. For reference the previous poll showed that the “remain” camp was leading the “leave” camp by four percentage points (44% remain vs. 40% leave, 15% undecided).

GBP/USD was down by 33 pips (-0.22%) to 1.4439, GBP/NZD was down by 200 pips (-0.93%) to 2.1160, GBP/JPY was down by 158 pips (-1.01%) to 157.69

USD – The Greenback is also a safe-haven currency, but it got no love from forex traders since it was the second weakest currency after the pound. There weren’t any apparent catalysts for the Greenback’s weakness, though.

USD/CHF was down by 49 pips (-0.59%) to 0.9891, USD/JPY was down by 82 pips (-0.75%) to 109.22, USD/CAD was down by 27 pips (-0.21%) to 1.3055

Watch Out For:

  • 1:30 pm GMT: RBC Canadian manufacturing PMI (52.2 previous)
  • 1:45 pm GMT: Markit’s final U.S. manufacturing PMI (unchanged at 50.5 expected)
  • 2:00 pm GMT: U.S. construction spending (0.6% expected, 0.3% previous)
  • 2:00 pm GMT: ISM’s U.S. manufacturing PMI (50.4 expected, 50.8 previous)
  • 6:00 pm GMT: U.S. Fed’s Beige Book will be released
  • Dairy auction currently underway (2.6% previous); auction usually ends at around 2:00 pm GMT

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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