- Swiss trade balance: 3.79B CHF vs. 2.51B CHF previous
- U.K. public sector net borrowing: £9.1B vs. £9.5B expected, £7.6B previous
- German ZEW current conditions: 54.5 vs. 53.0 expected, 53.1 previous
- German ZEW economic sentiment: 19.2 vs. 4.8 expected, 6.4 previous
- Euro Zone ZEW economic sentiment: 20.2 vs. 15.3 expected, 16.8 previous
- U.K. CBI industrial trends: -2 vs. -10 expected, -8 previous
- ECB Draghi and Fed Head Yellen will testify later
Risk sentiment was driving forex price action for the most part during today’s morning London session. And since risk appetite was the dominant sentiment, it naturally follows that the higher-yielders were giving the lower-yielding currencies the boot. The pound, meanwhile, continued to extend its gains on easing Brexit jitters.
U.K. deficit widens – Public sector loans in the U.K. came in at £9.1 billion in May, which is less than the expected £9.5 billion, but wider than Aprils’s upwardly revised £7.6 billion figure (£6.6 billion originally). The current reading is a six-month high and indicates that the budget deficit in the U.K. increased. A closer look at the details shows that the bulk of the deficit came from the central government.
Commodities tumble – I see red! Most commodities were bleeding out throughout the morning London session. Base metals were down and out for the count, with copper down by 0.96% to $2.073 per pound, zinc down by 0.92% to $134.80 per kilogram, and tin down by 0.54% to $16,952.50 per metric ton.
Precious metals were also leaking red, with gold down by 1.35% to $1,274.70 per troy ounce and silver down by 1.25% to $17.295 per troy ounce. Oil benchmarks were also sinking, with U.S. crude oil down by 1.16% to $49.38 per barrel and Brent crude oil down by 1.34% to $49.97 per barrel by the end of the session.
Market analysts couldn’t really pinpoint a catalyst for the broad-based commodities retreat, but some market analysts noted that weak industrial demand was weighing down on base metals. The slide in precious metals, meanwhile, was likely due to the prevalence of risk appetite, which reduced demand for traditional safe-havens like gold or silver. As for oil, some market analysts are pointing to renewed oversupply jitters as U.S. oil companies expand their drilling operations and Iraq expanded its oil facilities in Kharg Island.
Risk-taking continues – Commodities may be in the red, but European equities were in the green, with the pan-European FTSEurofirst 300 up by 0.41% to 1,332.51, the blue-chip Euro Stoxx 50 up by 0.69% to 2,965.50, the U.K. FTSE 100 up by 0.10% to 6,210.00, and the DAX up by 0.51% to 10,013.00 by the end of the session.
U.S. equity futures were also feeling the love, with the S&P 500 futures index up by 0.45% to 2,083.50 and the Nasdaq futures index up by 0.46% to 4,410.38.
Market analysts are still pointing to easing Brexit fears for the persistent risk-friendly environment.
Major Currency Movers:
NZD – The risk-on vibes during the morning London session gave the higher-yielding comdolls (NZD, CAD, AUD) some support against their forex rivals, with the Kiwi being the most well-supported since it was the one currency to rule them all by the end of the session.
NZD/USD was up by 26 pips (+0.37%) to 0.7148, NZD/JPY was up by 43 pips (+0.58%) to 74.81, NZD/CAD was up by 25 pips (+0.28%) to 0.9130
JPY – The risk-friendly environment may have been good for the comdolls, but it was completely toxic for the safe-haven yen since the yen was the worst-performing currency of the session.
USD/JPY was up by 25 pips (+0.24%) to 104.67, CHF/JPY was up by 34 pips (+0.32%) to 109.11, AUD/JPY was up by 28 pips (+0.36%) to 78.43
GBP – The mighty pound lost some of its bullish momentum during the morning London session, but it still ended up as the second-strongest currency after the Kiwi. It even shrugged off the increase in public sector net borrowing.
GBP/USD was up by 23 pips (+0.16%) to 1.4730, GBP/JPY was up by 51 pips (+0.34%) to 154.13, GBP/CAD was up by 13 pips (+0.07%) to 1.8815
- 1:00 pm GMT: ECB President Mario Draghi will testify before the Economic and Monetary Affairs Committee
- 2:00 pm GMT: Fed Chairperson Janet Yellen will testify before the Senate Banking Committee
- 6:30 pm GMT: Federal Reserve Governor Jerome Powell will give a speech
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
Head on to Big Pippin’s Daily Chart Art for some pip-locking technical weeks!