Article Highlights

  • Spanish unemployment change: 22.8K vs. 23.5K expected, 14.4K previous
  • U.K. construction PMI: 52.3 vs. 49.0 expected, 49.2 previous
  • Euro Zone PPI m/m: -0.2% vs. -0.1% expected, 0.1% previous
  • Euro Zone PPI y/y: -2.1% as expected, -2.8% previous
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Risk-taking was the name of the game during today’s morning London session, so the higher-yielders were well-supported while the safe-havens suffered. Meanwhile, the pound continued to show weakness on renewed Brexit jitters.

Major Events/Reports:

U.K. construction PMI – Markit/CIPS released the U.K.’s construction PMI reading for September earlier, and it jumped from 49.2 to 52.3. The jump is good enough, but it gets even better when you also consider that the reading was expected to deteriorate further to 49.0. Moreover, this is the first reading above the 50.0 stagnation level since May.

According to commentary from the PMI report, “improving confidence among clients and a reduced drag on demand from Brexit-related uncertainty” was a big factor for the jump. Moreover, overall construction increased, thanks to “a solid rebound in residential activity.” In addition, there was a “renewed rise in civil engineering activity, with the pace of expansion the fastest since March.”

The only dark spot was that “Commercial construction activity decreased for the fourth month running, which is the longest period of sustained decline since early-2013.” But on a more upbeat note, the fall in commercial construction was “the slowest recorded since the downturn began in June.”

More risk-taking – Risk appetite is here to stay from the looks of it, as most European equity indices headed into their second day of gains this week.

  • The pan-European FTSEurofirst 300 was up by 0.76% to 1,361.07
  • The blue-chip Euro Stoxx 50 was up by 0.73% to 3,021.00
  • The U.K.’s FTSE 100 was up 1.75% to 7,106.00
  • The DAX was down by 0.57% to 10,571.30

U.S. equity futures even got slightly supported.

  • S&P 500 futures were up by 0.05% to 2,154.25
  • Nasdaq futures were up by 0.13% to 4,872.12

Market analysts attributed the risk-on mood to returning confidence that Deutsche Bank could handle its problems, which caused Deutsche Bank shares to rise while improving overall risk sentiment.

Commodities routedCommodities were sounding the retreat during the morning London session.

Precious metals got slapped lower.

  • Gold was down by 0.10% to $1,311.50 per troy ounce
  • Silver was down by 0.42% to $18.788 per troy ounce

Base metals were a bit more mixed, but most were feeling the pain.

  • Copper was down by 0.64% to $2.178 per pound
  • Nickel was down by 1.38% to $10,175.00 per dry metric ton

And it Looks like the euphoria from the OPEC deal is finally starting to fade.

  • U.S. WTI crude oil was down by 0.94% to $48.35 per barrel
  • Brent blend crude oil was down by 0.75% to $50.51 per barrel

The broad-based commodities retreat was likely due to the Greenback’s recent strength. After all, the USD Index was up by 0.52% for the day to 96.15 by the end of the session.

Oh, for the newbies out there, globally-traded commodities are generally priced in U.S. dollars. A stronger Greenback would therefore mean that commodities are more expensive and less attractive to buy.

Of course, there were also individual reports for each commodity. In the case of oil, for example, it was also likely weighed down by reports that Libya was indeed given an exemption from OPEC’s plan to cut oil production. In addition, Libya’s oil output rose to 500,000 barrels per day and will likely continue to rise. Other than news about Libya, Iran also reported higher oil output and even signed a landmark project contract to raise its oil output even more.

Major Market Movers:

AUD – The commodities rout didn’t seem to dampen demand for the higher-yielding Aussie all that much, as forex traders seem to be more focused on the general risk-on vibes.

AUD/USD was up by 15 pips (+0.21%) to 0.7668, AUD/CHF was up by 39 pips (+0.53%) to 0.7519, AUD/JPY was up by 32 pips (+0.42%) to 78.62

GBP – The pound dropped hard an hour before the London session rolled around, probably because of persistent Brexit jitters. The pound then remained weak for the rest of the morning London session. So much so that it ended up as the second weakest currency. Not even the better-than-expected reading for the U.K.’s construction PMI was able to lend the pound any support.

GBP/USD was down by 27 pips (-0.21%) to 1.2745, GBP/AUD was down by 69 pips (-0.41%) to 1.6623, GBP/NZD was down by 54 pips (-0.32%) to 1.7499

CHF – The risk-friendly environment was not very friendly to the safe-haven Swissy, since it ended up as the worst-performing currency of the session. As for the other safe-havens, the yen was feeling the pain as well, but not as much as the Swissy. The Greenback, meanwhile, was more mixed.

USD/CHF was up by 31 pips (+0.32%) to 0.9806, EUR/CHF was up by 24 pips (+0.22%) to 1.0947, NZD/CHF was up by 31 pips (+0.44%) to 0.7143

Watch Out For:

  • 10:30 pm GMT: AIG’s Australian services PMI (45 previous)
  • 11:00 pm GMT: U.K. BRC shop price index (-2.0% previous)
  • Dairy auction currently underway (+1.7% previous); auction usually ends at around 2:00 pm GMT

See also:

Asian Session Forex Recap

U.S. Session Recap

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