Article Highlights

  • French INSEE manufacturing confidence: 101 vs. steady at 103 expected
  • Swiss industrial production y/y: -1.2% vs. 1.0% previous
  • German Ifo business climate: 106.2 vs. 108.5 expected, 108.3 previous
  • German Ifo current conditions: 112.8 vs. 114.9 expected, 114.8 previous
  • German Ifo business expectations: 100.1 vs. 102.4 expected, 102.1 previous
  • U.K. CBI realized sales: 9 vs. -5 expected, -14 previous
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Risk sentiment switched to risk-off, so the higher-yielding currencies and the lower-yielders had a reversal of fortunes. This time, it’s the higher-yielding currencies that got whupped.

Major Events/Reports:

Commodities retreat – Commodities showed moderate yet broad-based weakness during the morning London session. Market analysts couldn’t pinpoint the catalyst for the broad-based slide, though.

Precious metals got shunned despite the risk-off mood:

  • Gold was down by 0.45% to $1,323.75 per troy ounce
  • Silver was down by 0.39% to $18.483 per troy ounce

Base metals were mixed but mostly in the red:

  • Aluminum was down by 0.76% to $1,634.25 kilogram
  • Nickel was down by 1.45% to $9,837.50 per dry metric ton

Oil benchmarks were bleeding out:

  • U.S. WTI crude oil was down by 0.60% to $46.49 per barrel
  • Brent blend crude oil was down by 0.43% to $48.86 per barrel

French and German business sentiment weakens – The French manufacturing confidence index from Insee got eroded and fell from 103 to 101 during the July period. Meanwhile, Ifo reported that Germany’s business climate index, current conditions index, and business expectations index for July all took hits.

Market analysts were quick to attribute the deterioration in business sentiment in the two largest Euro Zone economies to the Brexit referendum.

Risk aversion returns – Risk appetite was banished and risk aversion reigned supreme during today’s morning London session.

  • The pan-European FTSEurofirst 300 was down by 0.84% to 1,344.68
  • The blue-chip Euro Stoxx 50 was down by 0.60% to 2,990.00
  • The U.K.’s FTSE 100 was down by 0.17% to 6,824.00
  • The DAX was down by 0.84% to 10,533.30

The gloomy mood also weighed down on U.S. equity futures:

  • The S&P 500 futures index was down by 0.18% to 2,171.00
  • The Nasdaq futures index was down by 0.21% to 4,776.12

Market analysts blamed the return of risk-off vibes to poor reports for pharmaceutical companies, the slide in metals that weighed down mining companies, and the deterioration in business sentiment in Germany and France.

Major Currency Movers:

EUR – The squeeze on European equities allowed the euro to easily trump all its forex rivals during the morning London session, even the safe-haven currencies.

EUR/USD was up by 22 pips (+0.19%) to 1.1287, EUR/JPY was up by 27 pips (+0.24%) to 113.42, EUR/AUD was up by 60 pips (+0.41%) to 1.4830

AUD – The risk-off mood and broad-based commodities retreat weighed heavily on all the comdolls. The Aussie, however, was crushed since it was the worst-performing currency of the session.

AUD/USD was down by 16 pips (-0.21%) to 0.7609, AUD/JPY was down by 12 pips (-0.16%) to 76.47, AUD/CHF was down by 21 pips (-0.29%) to 0.7351

GBP – After climbing higher for three straight days this week, the pound finally encountered and got mauled by some bears, so it ended up as the second-weakest currency after the Aussie. There was no major catalyst that could account for the pound’s weakness during the session, though, so that was likely due to profit-taking.

GBP/USD was down by 23 pips (-0.18%) to 1.3189, GBP/CHF was down by 34 pips (-0.27%) to 1.2739, GBP/JPY was down by 15 pips (-0.21%) to 132.53

Watch Out For:

  • 12:30 pm GMT: Headline (3.4% expected, -3.9% previous) and core (0.4% vs. -0.4% previous) readings for U.S. durable goods orders
  • 12:30 pm GMT: U.S. initial jobless claims (265K expected, 262K previous)
  • 12:30 pm GMT: Canadian corporate profits (-4.6% previous)
  • 1:45 pm GMT: Markit’s flash U.S. services PMI (51.9 expected, 51.4 previous)

Asian Session Forex Recap

U.S. Session Forex Recap

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