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  • French BOF business sentiment: steady at 97.0 as expected
  • Italian industrial production m/m: -0.6% vs. 0.1% expected, 0.4% previous
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Risk appetite persisted so the higher-yielding comdolls got supported during the morning London session, especially the Aussie , while the yen got the boot. The pound, meanwhile, got a bullish infusion, thanks to easing political uncertainty.

Major Events/Reports:

Cameron speaks – Outgoing British PM David Cameron gave the opening speech at Farnborough airshow today, and he used that as an opportunity to talk about trade, the economy, and Brexit-related stuff.

To be more specific, Cameron dismissed the possibility that there will be a second Brexit referendum, saying that the U.K. has entered a “new reality” and Britons must accept that and “make it work.”

He also emphasized the U.K.’s trade relations with the E.U., saying that the U.K. does “more trade with Belgium than with Indonesia, Malaysia, Vietnam and Singapore combined.” And he also pointed out that the U.K.’s economy is doing relatively well and that “in the last parliament we created more jobs in the UK than the rest of Europe put together,” but the U.K. faces “a massive productivity challenge” because “output per person, per hour is still lower than Germany, America and France.”

There can be only one – As I noted in my latest Top Forex Market Movers of the Week, the candidates for British PM boiled down to Theresa May (anti-Brexit) and Andrea Leadsom (pro-Brexit) and that we’ll be getting the results on September 9.

However, Andrea Leadsom announced that she was dropping out of the race earlier, leaving Theresa May as the only candidate for British PM. Leadsom explained that she finally decided to pull out because she believes that she does not have enough support for a “strong and stable government,” given that she only has the support of 84 MP’s while May has 199 supporters. Another reason that Leadsom cited is that she believes that May is “ideally placed” to start negotiations on an actual Brexit.

Brexit means Brexit – Before Leadsom announced her withdrawal to leave Theresa May as THE ONE, May was on the campaign trail and she said that: “Brexit means Brexit, and we’re going to make a success of it.” It’s therefore clear that she has no plans to allow a second Brexit referendum, even though May belonged to the “remain” camp herself.

Risk-taking to start the week – The risk-on vibes from the earlier Asian session carried over into the morning London session, the pan-European FTSEurofirst 300 up by 1.02% to 1,309.23, the blue-chip Euro Stoxx 50 yp by 1.20% to 2,873.50, the U.K.’s FTSE 100 up by 0.87% to 6,648.00, and the DAX up by 1.54% to 9,777.50.

U.S. equity futures were also in the green, with the S&P 500 futures index up by 0.37% to 2,128.25 and the Nasdaq futures index up by 0.51% to 4,540.25, so it looks the upbeat mood will carry over into the U.S. session.

Market analysts attributed the risk-on mood to expectations of further stimulus from Japan. Forex Gump has a quick write-up on that here, if you want to get up to speed.

Major Currency Movers:

GBP – The pound started the session by dipping either because of Cameron’s statement that a second Brexit referendum is not likely or Theresa May’s statement that “Brexit is Brexit.” The pound began surging higher after Leadsom announced that she was dropping out, though, likely because of easing political uncertainty now.

GBP/USD was up by 37 pips (+0.31%) to 1.2984 with 1.2850 as session low, GBP/JPY was up by 116 pips (+0.88%) to 132.96 with 131.15 as session low, GBP/CAD was up by 79 pips (+0.47%) to 1.6967 with 1.6828 as session low

AUD – The prevalence of risk appetite gave the higher-yielding comdolls a boost, with the Aussie being the favored comdoll. The Aussie still lost out to the pound, though.

AUD/USD was up by 13 pips (+0.18%) to 0.7562, AUD/JPY was up by 56 pips (+0.73%) to 77.43, AUD/CHF was up by 17 pips (+0.23%) to 0.743

JPY – The risk-on mood may have been good for the comdolls, but it wasn’t so kind to the safe-havens, especially the Japanese yen. Also, European forex traders were probably pricing in talks about the Japanese government’s plans for more stimulus. The Greenback’s price action, meanwhile, was more mixed, but showing signs of strength, probably because of last week’s NFP report.

USD/JPY was up by 58 pips (+0.56%) to 102.40, CHF/JPY was up by 50 pips (+0.49%) to 104.11, NZD/JPY was up by 37 pips (+0.50%) to 74.26

Watch Out For:

  • 12:15 pm GMT: Canadian housing starts (188.6K expected, 188.6K previous)
  • 2:00 pm GMT: Kansas City Fed President and voting FOMC member Esther George has a speech
  • 2:00 pm GMT: U.S. labor market conditions index (-4.8 previous)

See also:

Asian Session Forex Recap

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