Article Highlights

  • German trade balance: €19.5B vs. €23.7B expected, €24.7B previous
  • German current account: €16.6B vs. €24.5B expected, €26.3B previous
  • French industrial production m/m: -0.6% vs. 0.3% expected, -0.7% previous
  • French manufacturing production m/m: -0.3% vs. 0.7% expected, -1.1% previous
  • U.K. trade balance: -£11.76B vs. -£11.65B expected, -£12.92B previous
  • U.K. construction output m/m: 0.0% vs. -0.5% expected, -1.0% previous
  • U.K. construction output y/y: -1.5% vs. -3.4% expected, -0.7% previous
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Risk aversion was the name of the game during the morning London session, so the higher-yielding currencies got slapped lower while the safe-havens got some buyers. The yen began marching to the tune of a different drummer near the end of the session, though.

Major Events/Reports:

U.K. trade deficit narrows – The U.K.’s deficit on trade in goods narrowed from £12.92 billion to £11.76 billion in July. The smaller trade gap was due to exports rising by £0.8 billion and imports falling by £0.3 billion. And despite the Brexit referendum, exports to the E.U. actually rose by 9.1% to £12.54 billion. This is the biggest monthly increase since October 2010.

Downbeat risk sentiment – Today was another gloomy morning London session, with most of the major European equity indices leaking red.

  • The pan-European FTSEurofirst 300 was down by 0.37% to 1,369.16
  • The blue-chip Euro Stoxx 50 was down by 0.39% to 3,072.00
  • The DAX was down by 0.33% to 10,640.00

U.S. equity futures were also bleeding out, hinting that the risk-off mood may carry over into the upcoming U.S. session:

  • The S&P 500 futures were down by 0.29% to 2,171.25
  • Nasdaq futures were down by 0.24% to 4,784.62

Market analysts are still pointing to the yesterday’s disappointing ECB decision. Other than that, Germany’s disappointing trade numbers were also being cited as a reason for the downbeat mood.

Commodities retreat – Most commodities were feeling the pain during the morning London session, likely because of the Greenback’s recent strength, as well as profit-taking after broadly rising during the week.

Oil benchmarks were sinking:

  • U.S. WTI crude oil was down by 1.49% to $46.91 per barrel
  • Brent blend crude oil was down by 1.56% to $49.16 per barrel

Base metals were kicked lower:

  • Copper was down by 0.43% to $2.091 per pound
  • Aluminum was down by 0.25% to $1,587.25 per kilogram
  • Nickel was down by 0.68% to $2,302.25 per dry metric ton

And despite the risk-off vibes, precious metals couldn’t attract enough buyers:

  • Gold was down by 0.13% to $1,339.85 per troy ounce
  • Silver was down by 0.61% to $19.557 per troy ounce

Major Currency Movers:

JPY – Despite the risk-off vibes during the morning London session, the safe-haven yen ended up as one of the weakest currency of the session.

There was diverging price action during the first half of the session, since the yen advanced against the higher-yielders, but had a more difficult time against the other safe-havens and the euro. However, the yen suddenly got swamped by a deluge of sellers near the end of the session. There was no direct catalyst for the sudden weakness, though.

USD/JPY was up by 53 pips (+0.53%) to 102.74, EUR/JPY was up by 47 pips (+0.41%) to 115.67, CHF/JPY was up by 39 pips (+0.37%) to 105.52

GBP – The pound was the best-performing currency of the morning London session. But interestingly enough, it had a mixed performance at the start. Also, the revelation that the U.K.’s trade deficit narrowed in July didn’t actually elicit a major response from pound pairs.

It wasn’t until near the end of the session that the pound got a broad-based bullish boost. Unfortunately, there was no apparent catalyst for that, but it did coincide with the sudden weakness across yen pairs that I mentioned earlier.

GBP/NZD was up by 64 pips (+0.36%) to 1.8092, GBP/JPY was up by 71 pips (+0.52%) to 136.77, GBP/AUD was up by 94 pips (+0.54%) to 1.7530

AUD – The Aussie had the worst performance during the session, losing out to all its forex rivals. Although it admittedly only barely lost to the yen, thanks to the sudden yen weakness near the end. Anyhow, the Aussie’s weakness was likely due to the risk-off mood, as well as the broad-based retreat in commodity prices.

AUD/USD was down by 41 pips (-0.54%) to 0.7592, AUD/CHF was down by 27 pips (-0.37%) to 0.7392, AUD/JPY was down by 3 pips (-0.05%) to 77.99

Watch Out For:

  • 12:30 pm GMT: Canadian employment change (14.0K expected, -31.2K previous)
  • 12:30 pm GMT: Canada’s jobless rate (steady at 6.9% expected)
  • 2:00 pm GMT: U.S. wholesales inventories (0.1% expected, 0.3% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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