Article Highlights

  • German factory orders m/m: 0.0% vs. 1.0% expected, -1.9% previous
  • German factory orders y/y: -0.2% vs. 0.9% expected, -0.4% previous
  • Euro Zone retail PMI: 48.5 vs. 50.6 previous
  • U.K. housing equity withdrawal q/q: -£4.9B vs. -£10.1B expected, -£8.2B previous
  • FOMC minutes for the June meeting will be released later
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The bloodletting continued during today’s morning London session, so forex traders flocked to the safe-haven yen once more. The higher-yielding comdolls were surprisingly strong, however, while the euro and the pound were mixed.

Major Events/Reports:

Rumors from Italy denied – I mentioned in yesterday’s morning London session recap that the euro got a boost after an unnamed source told Bloomberg that Italy plans to prop up its troubled banks. Well, Reuters came out with a report earlier today, and the financial media outlet cited Treasury Undersecretary Pier Paolo Baretta’s email statement that: “No intervention is expected in the coming hours. We are monitoring the situation as agreed with the European Union.” The report didn’t have the same impact as it did yesterday, though, since euro pairs had a mixed performance during the session.

I see red! – The bloodletting didn’t let up during today’s morning London session, with the pan-European FTSEurofirst 300 down by 1.50% to 1,266.62, the blue-chip Euro Stoxx 50 down by 1.80% to 2,762.00, the U.K.’s FTSE 100 down by 1.47% to 6,449.00, and the DAX down by 1.75% to 9,366.00.

U.S. equity futures were also bleeding out, with the S&P 500 futures index down by 0.67% to 2,068.75 and the Nasdaq futures index down by 0.79% to 4,369.12. The traditional safe-haven gold was enjoying the risk-off mood, though, since it was up by 1.20% to $1,375.05 per troy ounce by the end of the session.

Market analysts blamed the risk-off mood on uncertainty due to the pro-Brexit vote, with property and banking stocks getting hit the hardest.

Commodities crushedCommodities were broadly in the red during the morning London session, with oil and base metals leading the way lower.

The base metal copper was down by 2.04% to $2.139 per pound while zinc was down by 1.55% to $140.10 per kilogram. As for oil benchmarks, U.S. WTI crude oil was down by 1.29% to $46.00 per barrel while Brent blend crude oil was down by 1.50% to $47.24 per barrel.

The slide in base metal prices was attributed to oversupply concerns due to rising inventory levels, as well as the relatively strong dollar, which made commodities unattractive. Some market analysts also cited economic worries due to the pro-Brexit vote for the slide in oil prices.

Major Currency Movers:

JPY – Another bout of risk aversion sent another wave of safe-haven flows towards the Japanese yen. Business as usual, I guess.

USD/JPY was down by 50 pips to 100.49, CHF/JPY was down by 56 pips to 102.59, CAD/JPY was down by 48 pips to 77.10

AUD & NZD – The Aussie and the Kiwi were both surprisingly strong during the morning London session. I say “surprising” because both are higher-yielding currencies, so the risk-off environment and the commodities selloff should have scared off buyers for the two currencies.

There were no direct catalysts during the session, but it’s worth noting that both currencies found some support during the late Asian session and that most Aussie pairs are now in the green for the day while Kiwi pairs are still mostly in the red, so the Aussie is apparently in more demand.

It’s possible that Aussie bulls started jumping in due to easing political uncertainty after Malcolm Turnbull’s Coalition began to take the lead in seats, and the Kiwi was taken along for a bullish ride due to its close trade relations with Australia. Another possible reason is that the long-term fundamentals I cited in last week’s Top Forex Market Movers may have been in play.

AUD/USD was up by 21 pips to 0.7477, AUD/CHF was up by 25 pips to 0.7301, AUD/CAD was up by 40 pips to 0.9720

NZD/USD was up by 11 pips to 0.7108, NZD/CAD was up by 27 pips to 0.9259, NZD/CHF was up by 14 pips to 0.6953

Watch Out For:

  • 12:30 pm GMT: Canadian trade balance (-$2.70B expected, -$2.94B previous)
  • 12:30 pm GMT: U.S. trade balance (-$40.0B expected, -$37.4B previous)
  • 1:00 pm GMT: Federal Reserve Governor Daniel Tarullo has a speech
  • 1:45 pm GMT: Markit’s final services PMI (expected to be revised higher from 51.5 to 51.3)
  • 2:00 pm GMT: ISM non-manufacturing PMI: (53.3 expected, 52.9 previous)
  • 6:00 pm GMT: FOMC minutes will be released

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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