Article Highlights

  • German IFO current conditions: 114.5 vs. 114.0 expected, 114.2 previous
  • German IFO business climate: 108.7 vs. 107.4 expected, 107.7 previous
  • U.K. BBA mortgage approvals: 41.29 vs. 37.5 expected, 40.1 previous
  • Cameron to step down as PM by October
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The European equities market was still reeling from the UK’s vote to get out of the EU, but things were beginning to settle down in the forex market, as some profit-taking took place. Is it finally over or is this just the calm before another storm?

Major Events/Reports:

Cameron to step down by October – David Cameron, the anti-Brexit Prime Minister of the U.K., admitted defeat by announcing earlier today that “fresh leadership” was needed and that he will therefore step down in October when the Conservative Party conference rolls around. He also stressed that he won’t be the one to conduct negotiations with the EU. And he also refused to invoke Article 50 of the Lisbon treaty, thereby delaying the UK’s withdrawal process, saying that it was the next PM’s job to do so, not his.

BOE Carney speaks on Brexit – Shortly after Cameron announced his plan to resign, the spotlight turned to BOE Guv’nah Mark Carney, and he said that the BOE and the Treasury are “well prepared” for a Brexit scenario since they have “engaged in extensive contingency planning.” He then added that the UK financial system is resilient, but that the BOE “will not hesitate to take additional measures as required.” He also said that the BOE is ready to support the market by providing more than £250bn of additional funds, as well “substantial liquidity in foreign currency, if required.”

European equities slaughtered – It was a bloodbath for European equities during today’s morning London session, with the pan-European FTSEurofirst 300 down by 7.09% to 1,263.55, the blue-chip Euro Stoxx 50 down by a whopping 9.08% to 2,759.00, the U.K. FTSE 100 down by 4.55% to 6,050.00, and the DAX down by 7.04% to 9,535.00 by the end of the session.

U.S. equity future were off their intraday lows, but were still in the red, signalling that risk aversion may spill over into the U.S. session. The S&P 500 futures index was down by 3.79% to 2,026.00 while the Nasdaq futures index was down by 3.74% to 4,295.75.

I don’t have to point out the reason why, do I?

SNB admits intervention – The SNB has confirmed earlier speculation that it was intervening in the forex market by weakening the Swiss franc, which has seen a torrent of safe-haven flows from terrified market players.

Major Currency Movers:

GBP & EUR – The pound and the euro were both licking their wounds during the morning London session, but began to see another wave of sellers near the opening U.S. session. Interestingly enough, both pound and euro pairs got even more buyers when Cameron announced that he was stepping down.

GBP/USD was up by 93 pips (+0.69%) to 1.3669 with 1.3980 as session high, GBP/JPY was up by 78 pips (+0.56%) to 139.85 with 144.08 as session high

EUR/USD was up by 23 pips (+0.21%) to 1.1053 with 1.1188 as session high, EUR/CHF was up by 16 pips (+0.15%) to 1.0787 with 1.0879 as session high

Comdolls – After losing terribly to the safe-havens in the aftermath of the “leave” camp’s victory, the higher-yielding comdolls (AUD, CAD, NZD) began to recover during the late Asian session and then extended their recovery when the morning London session rolled around.

NZD/USD was up by 60 pips (+0.88%) to 0.7077, NZD/CHF was up by 62 pips (+0.92%) to 0.6097

AUD/USD was up by 60 pips (+0.82%) to 0.7420, AUD/JPY was up by 72 pips (+0.96%) to 75.89

CAD/JPY was up by 23 pips (+0.29%) to 78.58, USD/CAD was down by 18 pips (-0.14%) to 1.3016

Watch Out For:

  • 12:30 pm GMT: Headline (-0.5% expected, -0.8% previous) and core (0.1% expected, 0.4% previous) readings for U.S. durable goods orders
  • 2:00 pm GMT: UoM final U.S. consumer sentiment index (94.1 expected, 94.3 previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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