Article Highlights

  • U.K. Nationwide HPI m/m: 0.1% vs. 0.2% expected, 0.0% previous
  • U.K. Nationwide HPI y/y: 4.4% vs. 4.7% expected, 4.6% previous
  • Swiss retail sales y/y: -0.5% vs. -2.2% expected, -2.3% previous
  • Swiss manufacturing PMI: 56.5 vs. 54.4 expected, 54.7 previous
  • French final manufacturing PMI: revised higher from 51.5 to 51.7
  • German final manufacturing PMI: revised lower from 54.4 to 54.3
  • Euro Zone final manufacturing PMI: unchanged at 53.7 as expected
  • U.K. manufacturing PMI: 53.4 vs. 54.4 expected, 54.2 previous
  • Euro Zone jobless rate: 9.8% vs. 10.0% expected, 9.9% previous
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Directional movement was rather limited for many pairs during today’s morning London forex session. However, the pound and the Swissy were very clearly on the move. What’s up with that?

Major Events/Reports:

U.K. manufacturing PMI drops – Markit released its manufacturing PMI report for the U.K. earlier today, and it was revealed that the headline reading for November dropped further from 54.2 to 53.4. This is a disappointment because the consensus was for the reading to improve to 54.4. Moreover, the reading has been sliding since September’s a 27-month high of 55.5.

Looking at the details of the PMI report, the drop was due to production and new orders growth losing impetus. In particular, “the trend in new orders for investment goods such as plant and machinery has eased sharply.”

Brexit Secretary Davis Speaks – David Davis, the U.K.’s lead Brexit negotiator, was asked by Labour MP Wayne David the following question earlier:

“Will the government consider making any contribution in any shape or form for access to the single market?”

And Davis replied as follows:

“The major criterion here is that we get the best possible access for goods and services to the European market and if that is included in what he’s talking about then of course we would consider it.”

When reporters later asked the Prime Minister’s spokesman, the spokesman confirmed Davis’ earlier statement by saying that:

“As we approach these negotiations we want to get the best possible access for British business to trade with, and operate within, the single market, while also taking back control of immigration. We are now doing the work to prepare for those negotiations.”

Oil keeps climbing – The OPEC-induced oil party is still underway it seems, since oil benchmarks continue to extend their gains.

  • U.S. crude oil was up by 1.46% to $50.16 per barrel
  • Brent crude oil was up by 1.54% to $52.64 per barrel

The oil party apparently got extended after Energy Minister Alexander Novak told the press earlier that Russia will also be cutting its oil output from record high November-December levels.

Risk aversion returns – After being banished for a while, risk aversion made a comeback during today’s morning London session, pushing the major European equity indices into negative territory.

  • The pan-European FTSEurofirst 300 was down by 0.64% to 1,342.27
  • The blue-chip Euro Stoxx 50 was down by 0.95% to 3,023.00
  • Germany’s DAX was down by 1.10% to 10,523.50

U.S. equity futures were also feeling the heat.

  • S&P 500 futures were down by 0.14% to 2,195.75
  • Nasdaq futures were down by 0.21% to 4,806.00

Almost all sectors were in the red. And market analysts attributed the returning risk-off vibes to profit-taking and overall skittishness ahead of this weekend’s Italian referendum and the possibility of an Italeave.

 Major Market Movers:

GBP – The pound had a mixed start but later got slapped uniformly lower when the disappointing PMI report was released. Luckily for pound bulls, Brexit Secretary Davis was being grilled at the time, and his statement about paying up to get access to the E.U. single market apparently reduced anxieties related to a so-called “hard” Brexit, which stoked demand for the pound while pound shorts ended up unwinding their positions. Well, that’s what some market analysts are saying anyway. Other than Davis’ statement, there wasn’t really anything else that could have driven up the pound.

GBP/USD was up by 109 pips (+0.86%) to 1.2644 with 1.2506 as session low, GBP/JPY was up by 161 pips (+1.13%) to 144.69 with 142.93 as session low, GBP/NZD was up by 192 pips (+1.09%) to 1.7870 with 1.7661 as session low

CHF – Returning risk aversion means demand for safe-havens. And the safe-haven of choice in today’s morning London session was apparently the Swissy, since the Greenback had a more mixed performance while the yen was mostly weak.

USD/CHF was down by 16 pips (-0.16%) to 1.0134, AUD/CHF was down by 33 pips (-0.44%) to 0.7480, NZD/CHF was down by 25 pips (-0.36%) to 0.7170

Watch Out For:

  • 1:30 pm GMT: U.S. initial jobless claims (253K expected, 251K previous)
  • 2:30 pm GMT: Markit/RBC Canadian manufacturing PMI (51.1 previous)
  • 2:45 pm GMT: Markit’s final U.S. manufacturing PMI (no change from 53.9 expected)
  • 3:00 pm GMT: ISM’s U.S. manufacturing PMI (52.5 expected, 51.9 previous)
  • 3:00 pm GMT: U.S. construction spending (0.6% expected, -0.4% previous)

See also:

Asian Session Recap

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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