Article Highlights

  • German retail sales m/m: 0.9% vs. 0.6% expected, -0.9% previous
  • French consumer spending m/m: -0.7% vs. -0.1% expected, same as last time
  • Swiss KOF economic barometer: 102.4 vs. 102.6 expected, 102.9 previous
  • German unemployment change: -6K vs. -5K expected, -11K previous
  • U.K. current account: -£32.6B vs. -£28.0B expected, -£34.0B previous
  • U.K. final Q1 GDP estimate q/q: unchanged at 0.4% as expected
  • U.K. final Q1 GDP estimate y/y: unchanged at 2.0% as expected
  • U.K. index of services q/q: 0.5% vs. 0.4% expected, 0.6% previous
  • Euro Zone flash HICP y/y: 0.1% vs. 0.0% expected, -0.1% previous
  • Euro Zone flash core HICP y/y: 0.9% vs. steady at 0.8% expected
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Price action was a bit wonky during the morning London session since risk aversion seems to be returning, but the Aussie and the Kiwi were doing well while the pound and euro had some roller coaster price action. And this was likely because of month-end flows.

Major Events/Reports:

Brexit Boris drops out – Boris Johnson, one of the most recognizable figures of the “remain” camp announced in a speech earlier that he won’t be running as a candidate for the next British prime minister, telling listeners that: “Having consulted colleagues and in view of the circumstances in Parliament I have concluded this person cannot be me.”

The contenders – Graham Brady, chairman of the backbench 1922 committee, has confirmed that the official line-up of candidates running to be the next British PM is down to five persons now that Brexit Boris has pulled out. The shortlisted contenders are Theresa May, Michael Gove, Stephen Crabb, Liam Fox and Andrea Leadsom.

Risk aversion returning? – The post-Brexit rally appears to be losing steam in Europe. The pan-European FTSEurofirst 300 was still up by 0.07% to 1,291.72 by the end of the morning London session, but it’s off it intraday high, having reached 1,296.71 earlier.

Other European equity indices were pushed into negative territory, with the UK’s FTSE 100 down by 0.13% to 6,352.00 and the DAX down by 0.18% to 9,595.00 after posting gains earlier.

U.S. equity futures were also leaking slightly, with the S&P 500 futures index down by 0.06% to 2,065.50 while the Nasdaq futures index was down by 0.07% to 4,359.75

Market analysts noted that banking stocks were the main losers, and they attributed this to yesterday’s revelation that some banks failed the U.S. Fed’s stress test. I’ll also add that we may be seeing some month-end repositioning activity and/or profit-taking.

Month-end flows? – It’s the 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:

EUR & GBP – Two currencies had a mixed performance during the morning London session, but they both got some buyers that buoyed them for most of the session before getting a surge of sellers near the end of the session. This wonky price action may have been due to month-end flows, although it’s interesting to note that the pound got some buyers when Brexit Boris announced that he was pulling out. The bullish push obviously didn’t have any traction, though.

GBP/USD was down by 16 pips (-0.12%) to 1.3421 with 1.3495 as session high, GBP/CAD was down by 32 pips (-0.19%) to 1.7381 with 1.7477 as session high, GBP/AUD was down by 34 pips (-0.20%) to 1.8043 with 1.8179 as session high

EUR/USD was down by 4 pips (-0.04%) to 1.1103 with 1.1154 as session high, EUR/JPY was up by 8 pips (+0.08%) to 114.08 with 114.79 as session high, EUR/CAD was down by 16 pips (-0.11%) to 1.4378 with 1.4428 as session high

AUD & NZD – Despite the prevalence of risk aversion during the morning London session, the Aussie and the Kiwi, which are both higher-yielding comdolls, were able to score wins against most of their forex rivals, which is why I said that price action was kinda wonky earlier. There were no apparent catalysts that could have stoked demand for the two currencies, but it’s likely that they got a boost from month-end flows.

NZD/USD was up by 13 pips (+0.19%) to 0.7106, NZD/CAD was up by 10 pips (+0.11%) to 0.9201, NZD/JPY was up by 20 pips (+0.29%) to 72.98

AUD/USD was up by 7 pips (+0.10%) to 0.7439, AUD/JPY was up by 15 pips (+0.18%) to 76.41, AUD/CAD was up by 2 pips (+0.02%) to 0.9633

Watch Out For:

  • 12:30 pm GMT: Canadian GDP (0.1% expected, -0.2% previous)
  • 12:30 pm GMT: Canadian RMPI (5% expected, 0.7% previous)
  • 12:30 pm GMT: Canadian IPPI (0.3% expected, -0.5% previous)
  • 12:30 pm GMT: U.S. initial jobless claims (267K expected, 259K previous)
  • 1:45 pm GMT: U.S. Chicago PMI (51.0 expected, 49.3 previous)
  • 3:00 pm GMT: BOE Guv’nah Mark Carney has a speech
  • 5:30 pm GMT: St. Louis Fed President James Bullard will talk about the U.S. economy

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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