Article Highlights

  • Swiss UBS consumption indicator: 1.49 vs. 1.55 expected, 1.47 previous
  • German retail sales m/m: 2.4% vs. +1.0% expected, -1.5% previous
  • German retail sales y/y: -1.0% vs. 1.0% expected, 0.6% previous
  • Swiss KOF leading indicator: 102.2 vs. 104.0 expected, 103.9 previous
  • German jobless rate: steady at 6.0% as expected
  • German unemployment change: -5K as expected, -13K previous
  • Euro Zone flash HICP y/y: 0.6% as expected vs. 0.5% previous
  • Euro Zone flash core HICP y/y: 0.8% as expected, same as previous
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There was some rather wonky price action during today’s morning London session. However, the Loonie clearly reigned supreme, thanks to surging oil prices. Another round of risk-taking, meanwhile, meant that the safe-haven yen got the boot yet again.

Major Events/Reports:

Month-end flows? – It’s the last trading day of the month, so some month-end capital flows are to expected as hedge funds, mutual funds, pension funds, and other large players rebalance their portfolios and/or prepare to make cash distributions. Also, month-end flows help to explain some of the rather wonky price action during the session.

BOE’s stress test results – The BOE released the results of its stress test on the seven biggest lenders in the U.K., and it was revealed that HSBC, the Lloyds Banking Group, the Nationwide Building Society, and Santander UK all passed the test. Standard Chartered and Barclays, meanwhile, failed to pass the test, but are not required to submit a revised capital plan. As for The Royal Bank of Scotland Group, it failed the test and was required to submit a revised capital plan, which was already received by the BOE.

BOE’s financial stability report – Aside from the stress test results, the BOE also released its semi-annual Financial Stability Report. In the said report, the BOE said that the U.K.’s financial system has done rather well in the wake of the Brexit referendum. However, the BOE also had this to say (emphasis mine):

“The outlook for UK financial stability remains challenging. The UK economy has entered a period of adjustment following the EU referendum. The likelihood that some UK-specific risks to financial stability could materialise remains elevated.”

Oil soars like an eagle! – Most commodities got kicked lower during the morning London session. However, there was one very noticeable exception – oil.

  • U.S. crude oil surged by 7.19% to $48.48 per barrel
  • Brent crude oil skyrocketed by 7.40% to $50.82 per barrel

According to market analysts, the surge in oil prices was due to heavy speculation that OPEC would be able to hammer out an oil production deal in today’s meeting. Speculation on the OPEC deal was apparently triggered by a Reuters article that cited an unnamed source who said that OPEC has plans to slash output by 1.4 million barrels per day. This is more than planned cut of 1.2 million barrels per day that was initially agreed upon.

More risk-taking – Almost all of the major European equity indices were in the green today, so risk appetite seems to be the dominant sentiment.

  • The pan-European FTSEurofirst 300 was up by 0.25% to 1,346.98
  • The blue-chip Euro Stoxx 50 was up by 0.47% to 3,050.00
  • Germany’s DAX was up by 0.24% to 10,646.50

Even U.S. equity futures got some support.

  • S&P 500 futures were up by 0.11% to 2,203.25
  • Nasdaq futures were up by 0.10% to 4,865.62

Meanwhile, precious metals, which are considered as traditional safe-havens, got the boot.

  • Gold was down by 0.26% to $1,187.65 per troy ounce
  • Silver was down by 0.20% to $16.707 per troy ounce

Market analysts point out that oil shares are leading the way, so the risk-on mood was (and still is) likely being fueled by the surge in oil prices. Fun with puns!

 Major Market Movers:

CAD – The Loonie reigned supreme during today’s morning London session, thanks to the surge in oil prices. In fact, the Loonie also happens to be the best performing currency of day (so far). Heck, the Loonie is now even the best performing currency of the week (so far) after dethroning the mighty Kiwi earlier.

USD/CAD was down by 63 pips (-0.47%) to 1.3380, AUD/CAD was down by 91 pips (-0.91%) to 0.9960, GBP/CAD was down by 66 pips (-0.39%) to 1.6700

EUR – Despite the risk-on vibes that sent European equities higher, the euro also steadily climbed higher to end up as the second strongest currency of the session. The Euro Zone did get some positive economic reports earlier, but the euro barely budged when they were released. The euro even dipped slightly when Germany’s jobs report was released. Anyhow, market analysts are pointing to month-end flows to explain this rather wonky price action.

EUR/USD was up by 13 pips (+0.13%) to 1.0636, EUR/JPY was up by 73 pips (+0.61%) to 120.47, EUR/CHF was up by 30 pips (+0.28%) to 1.0805

JPY – The yen got spurned yet again in today’s session, likely because the risk-on vibes dampened demand for the safe-haven.

USD/JPY was up by 54 pips (+0.48%) to 113.28, GBP/JPY was up by 76 pips (+0.54%) to 141.36, CAD/JPY was up by 83 pips (+1.00%) to 84.67

Watch Out For:

  • 1:15 pm GMT: U.S. ADP employment report (170K expected, 147K previous)
  • 1:30 pm GMT: U.S. personal spending (0.5% expected, same as previous)
  • 1:30 pm GMT: U.S. core PCE price index (0.1% expected, same as previous)
  • 1:30 pm GMT: U.S. personal income (0.4% expected, 0.3% previous)
  • 1:30 pm GMT: Canada’s monthly GDP (0.1% expected, 0.2% previous)
  • 1:30 pm GMT: Canada’s RMPI (3.5% expected, -0.1% previous)
  • 2:45 pm GMT: U.S. Chicago PMI (52.5 expected, 50.6 previous)
  • 3:00 pm GMT: U.S. pending home sales (0.1% expected, 1.5% previous)
  • 3:30 pm GMT: U.S. crude oil inventories (0.7M expected, -1.3M previous)
  • 4:45 pm GMT: U.S. Fed Governor Jerome Powell has a speech
  • 7:00 pm GMT: U.S. Fed’s Beige Book will be released

See also:

Asian Session Recap

U.S. Session Recap

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