Article Highlights

  • German current account: €28.8B vs. €21.0B expected, €29.9B previous
  • German trade balance: €25.6B vs. €22.8B expected, €26.2B previous
  • Italian jobless rate q/q: 11.6% as expected, previous reading revised from 11.5% to 11.6%
  • U.K. goods trade balance: -£10.53B vs. -£11.00B expected, -£10.65B previous
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There was weeping and gnashing of teeth during today’s morning London session, as risk aversion spread through the European markets like a plague. Quite naturally, forex traders were fleeing to the safe-haven currencies.

Major Events/Reports:

Commodities routedCommodities were in full retreat during the morning London session, after a very strong performance yesterday.

The base metal copper was down by 0.27% to $2.056 per pound while the safe-haven gold was down by 0.06% to $1,261.55 per troy ounce despite the prevalence of risk aversion during the session. Oil benchmarks, meanwhile, were pushed into the red, with U.S. crude oil down by 0.41% to $51.02 per barrel while Brent crude oil was down by 0.67% to $52.16 per barrel.

The commodities rout was being blamed on the Greenback’s recent recovery, which likely convinced some market players to take some delicious profits off the table.

Risk aversion domination – Risk appetite was nowhere in sight during the morning London session, with the pan-European FTSEurofirst 300 down by 0.78% to 1,342.30, the blue-chip Euro Stoxx 50 down by 0.68% to 2,996.50, and the DAX down by 1.26% to 10,088.50. U.S. equity futures were also leaking red, with the S&P 500 futures index down by 0.33% to 2,111.00 and the Nasdaq futures index down by 0.28% to 4,506.50.

Aside from risk aversion spillover from the earlier Asian session, some market analysts blamed the second day of risk aversion in the European markets to weakening confidence that central banks can help support growth in the global economy, as well as jitters as the Brexit referendum looms ever closer.

Other market analysts were pointing out that the shares of mining, oil, and other commodities-related companies were the main losers, so they were essentially attributing the risk aversion to the broad-based commodities retreat that I mentioned earlier.

Major Currency Movers:

Safe-havens – The risk-off vibes meant that there was high demand for the safe-haven currencies (JPY, USD, CHF). And it looks like the Japanese yen was the safe-haven of choice during the morning London session since it trumped its fellow safe-havens to emerge as the one currency to rule them all (during this session at least).

USD/JPY was down by 23 pips (-0.22%) to 106.49, CHF/JPY was down by 66 pips (-0.60%) to 110.64, CAD/JPY was down by 53 pips (-0.62%) to 83.66

EUR/USD was down by 58 pips (-0.50%) to 1.1341, GBP/USD was down by 57 pips (-0.40%) to 1.4459, AUD/USD was down by 41 pips (-0.56%) to 0.7428

CAD/CHF was down by 19 pips (-0.27%) to 0.7543, EUR/CHF was down by 12 pips (-0.12%) to 1.0914, AUD/CHF was down by 13 pips (-0.18%) to 0.7150

CAD – Retreating commodities and risk aversion meant that the higher-yielding comdolls (CAD, AUD, NZD) got smacked around during the session. The poor Loonie really got the stuffing beaten out of it, though, since it lost out to its fellow comdolls and ended up as the weakest currency of the session.

USD/CAD was up by 81 pips (+0.65%) to 1.2757, AUD/CAD was up by 8 pips (+0.09%) to 0.9477, NZD/CAD was up by 12 pips (+0.14%) to 0.9066

Watch Out For:

  • 12:30 pm GMT: Canadian capacity utilization (81.3% expected, 81.1% previous)
  • 12:30 pm GMT: Canadian NHPI (0.2% expected, 0.2% previous)
  • 12:30 pm GMT: U.S. initial jobless claims (270K expected, 267K previous)
  • 2:00 pm GMT: Wholesales inventories (0.1% expected, 0.1% previous)
  • 2:30 pm GMT: BOC financial system review
  • 3:15 pm GMT: BOC press conference on the financial system review

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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