Article Highlights

  • French trade balance: -€2.8B vs. -€4.92B expected, -€4.8B previous
  • German industrial production m/m: -1.3% vs. 0.1% expected, 0.5% previous
  • German industrial production y/y: -0.4% vs. 1.5% expected, 0.8% previous
  • Swiss CPI m/m: 0.1% as expected, same pace as previous
  • Swiss CPI y/y: -0.4% vs. -0.5% expected, -0.4% previous
  • U.K. Halifax HPI m/m: 1.3% vs. 0.3% expected, 0.6% previous
  • U.K. industrial production m/m: -0.5% vs. -1.0% expected 2.1% previous
  • U.K. industrial production y/y: 1.4% vs. 0.5% expected, 2.2% previous
  • U.K. manufacturing production m/m:-0.5% vs. -1.2% expected, 2.4% previous
  • U.K. manufacturing production y/y: 1.7% vs. 0.4% expected, 1.5% previous
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Risk appetite made a comeback on the back of easing Brexit fears during today’s morning London session, so the pound and the higher-yielding comdolls got a boost while the safe-havens got dumped, especially the yen.

Major Events/Reports:

U.K. reports beat expectationsThe Halifax HPI for June jumped by 1.3%, beating expectations of a 0.3% increase, which is great. It did fall a bit on a three-month annualized basis (8.4% vs 9.2% previous), however, and commentary from the report noted that data gathering occurred before the Brexit referendum, and “it is far too early to determine any impact since.”

Next, industrial production in the U.K. expanded by 1.4% year-on-year in May, which is significantly better than the expected 0.5% increase, although it’s still weaker than the previous 2.2% increase. On a monthly basis, industrial production fell by 0.5%, but on a more upbeat note, it managed to beat expectations that industrial output will fall by 1.0% month-on-month.

The jump in annual industrial production was due to manufacturing output rapidly accelerating by 1.7% on an annual basis, which is faster than the expected 0.4% increase and the previous month’s 1.5% increase. The manufacturing sector was also the main drag on the monthly reading since manufacturing output contracted by 0.5%.

ECB meeting minutes – We finally got our hands on the minutes of the June ECB meeting, and it was rather underwhelming. ECB officials gave themselves a pat on the back for the steady but moderate recovery in the Euro Zone since “the additional March policy package had been instrumental in avoiding a severe deterioration in financial conditions.”

They then discussed and lamented the low inflation readings in the Euro Zone before moving on to monetary policy, and ECB officials “stressed that additional stimulus, beyond the impetus already taken into account, was expected from the monetary policy measures still to be implemented.”

This confirms Forex Gump’s assertion that ECB Draghi’s statement during his June 21 testimony that “Further monetary policy stimulus is in the pipeline” refers to the implementation of the new series of targeted longer-term refinancing operations (TLTRO II).

ECB officials also discussed the negative effects of a Brexit, saying that it could be “significant, although difficult to anticipate.” Overall, nothing really new for traders to nibble on and most of the discussion on Brexit is moot since the ECB meeting happened before the pro-Brexit vote, which is probably why the euro didn’t have much of a reaction to the release of the ECB minutes.

Risk appetite resurrected – Risk-taking made a comeback in Europe, with the pan-European FTSEurofirst 300 up by 1.27% to 1,280.91, the blue-chip Euro Stoxx up by 1.03% to 2,789.50, the U.K.’s FTSE 100 up by 0.98% to 6,527.00, and the DAX up by 0.81% to 9,449.00.

Market analysts attributed the rebound mainly to fading Brexit fears, which seems reasonable since the pound was supported during the morning London session. It remains to be seen if the risk-on mood will carry over into the upcoming U.S. session, though, since U.S. equity futures were slightly in the red, with the S&P 500 futures index down by 0.16% to 2,090.75 and the Nasdaq futures index down by 0.13% to 4,433.75.

Major Currency Movers:

GBP – Easing Brexit fears gave pound pairs enough buyers to ensure that the pound would end up as the best performing currency of the morning London session. The better-than-expected readings may have helped as well, but I doubt it since those reports were compiled before the Brexit referendum.

GBP/USD was up by 49 pips (+0.38%) to 1.3012, GBP/JPY was up by 81 pips (+0.62%) to 131.37, GBP/CHF was up by 58 pips (+0.46%) to 1.2709

NZD – The Kiwi was giving the pound a run for its money, but ultimately gave way to the mighty pound and contented itself with being the second-strongest currency of the session.

I just wanna point out that the Kiwi actually got a major bullish boost during the late Asian session, and that was attributed to lower rate cut expectations after RBNZ Deputy Governor Grant Spencer said that “Further reductions in the OCR could pose a risk to financial stability through their effect on credit growth and house prices.” This may seem like a big thing, but this was already discussed by Forex Gump when he reviewed the RBNZ’s Annual Statement of Intent.

NZD/USD was up by 25 pips (+0.38%) to 0.7217, NZD/JPY was up by 43 pips (+0.60%) to 72.86, NZD/CHF was up by 31 pips (+0.45%) to 0.7050

JPY – The return of risk appetite naturally meant lower demand for the safe-havens, and the yen got the worst of it since it ended up as the weakest currency of the session.

USD/JPY was up by 24 pips (+0.24%) to 100.96, CAD/JPY was up by 30 pips (+0.40%) to 78.06, CHF/JPY was up by 17 pips (+0.17%) to 103.35

Watch Out For:

  • 12:15 pm GMT: ADP U.S. employment survey (160K expected, 173K previous)
  • 12:30 pm GMT: Canadian building permits (1.5% expected, -0.3% previous)
  • 12:30 pm GMT: U.S. initial jobless claims (269K expected, 268K previous)
  • 2:00 pm GMT: Canada’s Ivey PMI (51.2 expected, 49.4 previous)
  • 2:00 pm GMT: NIESR U.K. GDP estimate (0.5% previous)
  • 3:00 pm GMT: U.S. crude oil inventories (-2.1M expected, -4.1M previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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