Article Highlights

  • U.K. Nationwide HPI m/m: 0.0% vs. 0.2% expected, 0.3% previous
  • U.K. Nationwide HPI y/y: 4.6% vs. 4.9% expected, 5.3% previous
  • German jobless rate: 6.0% vs. steady at 6.1% expected
  • German unemployment change: -13K vs. -1K expected, 1K previous
  • Euro Zone final manufacturing PMI: revised higher to 53.5 vs. steady at 53.3 expected
  • U.K. construction PMI: 52.6 vs. 51.8 expected, 52.3 previous
  • FOMC rate decision and statement later
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Risk sentiment was still driving forex price action for the most part during today’s morning London session. The pound, meanwhile, got buoyed by the unexpected rise in construction PMI while follow-through buying underpinned the Kiwi.

Major Events/Reports:

U.K. construction PMI rises – After yesterday’s disappointing dip in Markit’s October manufacturing PMI reading, pound bulls got some relief after it was revealed that Markit’s U.K. construction PMI for October climbed from 52.3 to 52.6. The reading is a pleasant surprise compared to the consensus that it would slide lower to 51.8. Moreover, the recent reading is the highest since March of this year.

Commentary from the PMI report noted that the unexpected rise in the headline reading was due to “another solid increase in residential work.” However, additional commentary noted that new business growth “was only moderate in October and still much weaker than seen during the first quarter of 2016.”

Risk aversion persists – European equity indices opened lower pretty much across the board. They then continued to extend their losses during the course of the morning London session.

  • The pan-European FTSEurofirst 300 was down by 0.60% to 1,316.63
  • The blue-chip Euro Stoxx 50 was down by 0.72% to 2,996.00
  • Germany’s DAX was down by 0.93% to 10,428.00
  • The U.K.’s FTSE 100 was down by 0.41% to 6,888.70

Even U.S. equity futures got pulled down by the risk-off mood.

  • S&P 500 futures were down by 0.18% to 2,100.00
  • Nasdaq futures were down by 0.17% to 4,749.38

Market analysts blamed today’s round of risk aversion to jitters related to the U.S. presidential election finally spilling over into European markets.

Oil takes a plunge – Oil benchmarks were bleeding out profusely throughout the morning London session.

  • U.S. crude oil was down by 1.59% to $45.93 per barrel
  • Brent crude oil was down by 1.45% to $47.44 per barrel

According to market analysts, the slump in oil prices was due to a disappointing rise in U.S. oil inventories, citing data from the American Petroleum Institute. This then apparently induced some speculation that the official reading from the U.S. Energy Information Administration (EIA), which is scheduled to come out later, would also disappoint.

Major Market Movers:

JPY – The persistent risk aversion sent forex traders scurrying towards the safe-haven Japanese yen. The yen was not the strongest currency of the session, though.

EUR/JPY was down by 29 pips (-0.25%) to 114.61, CAD/JPY was down by 24 pips (-0.31%) to 77.27, CHF/JPY was down by 21 pips (-0.20%) to 106.38

GBP – The pound had a mixed performance at the start of the session, but got a bullish boost across the board when Markit’s construction PMI reading came in better-than-expected. However, the pound was not the best-performing currency of the session. It did manage to come in second, though.

GBP/USD was up by 80 pips (+0.66%) to 1.2315, GBP/CHF was up by 33 pips (+0.27%) to 1.1955, GBP/CAD was up by 64 pips (+0.39%) to 1.6456

NZD – The mighty Kiwi reigned supreme during the morning London session, even though there were no catalysts and despite the prevalence of risk aversion. The likely explanation for this wonky price action is that we’re just seeing follow-through buying after New Zealand released a significantly better-than-expected jobs report earlier.

NZD/USD was up by 61 pips (+0.84%) to 0.7283, NZD/CHF was up by 31 pips (+0.45%) to 0.7071, NZD/CAD was up by 53 pips (+0.55%) to 0.9730

USD – The Greenback is still on the back foot, ending up as the worst-performing currency of the session (and the entire day for that matter). The Greenback’s slide may be due to jitters related to the U.S. presidential elections. Although it’s also possible that Greenback bulls are abandoning ship ahead of the FOMC statement for later.

USD/JPY was down by 60 pips (-0.58%) to 103.25, USD/CAD was down by 36 pips (-0.27%) to 1.3361, USD/CHF was down by 37 pips (-0.39%) to 0.9706

Watch Out For:

  • 12:15 pm GMT: ADP’s U.S. employment survey (165K expected, 154K previous)
  • 2:30 pm GMT: U.S. crude oil inventories (1.6M expected, -0.6M previous)
  • 5:30 pm GMT: BOC Senior Deputy Governor Carolyn Wilkins has a speech later
  • 6:00 pm GMT: FOMC rate decision and statement (no rate hike from 0.5% expected)

See also:

Asian Session Forex Recap

U.S. Session Recap

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