Article Highlights

  • Swiss jobless rate: steady at 3.3% as expected
  • German trade balance: €20.5B vs. €20.8B expected, €21.1B previous
  • French budget balance: -€85.5B vs. -€83.0B previous
  • French industrial production m/m: -0.2% vs. 0.6% expected, -1.4% previous
  • U.K. goods trade balance: -£9.7B vs. -£11.9B expected, -£13.8B previous
  • U.K. construction output m/m: -0.6% vs. 0.2% expected, 0.9% previous
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Risk sentiment drove price action for the most part during today’s morning London session. However, Brexit-related news resulted in the pound getting pushed this way and that. The ECB’s policy decision from yesterday, meanwhile, was still apparently weighing down on the euro.

Major Events/Reports:

Leaked memo about Brexit Davis – The Financial Times leaked a very widely-circulated memo earlier. The memo was taken after a November 15 meeting between top Brexit negotiator David Davis and a representative for the City of London Corporation. And according to the memo, Davis said that he was “not really interested” in a transitional deal between the E.U. and the U.K.

Also according to the memo, Davis “did not foresee any benefits” to such a deal, adding that it “could be perceived as a delay to the process that is not something the Government can abide.” However, Davis quipped that if the E.U. wants such an agreement, then he would be “more in favour. I will be kind.”

Other than that, there were discussions about immigration and how the U.K. will “take back control of its borders” as well as the unlikely prospect of gaining access to the single market, given the E.U.’s stance on freedom of movement of people.

Aside from those, there was also an interesting discussion on Trump and how he signals a “wave of nationalism” in Europe.

Memo on Brexit Davis rebuffed – After the leak, a spokesman for Theresa May’s government told the press that Brexit Davis’ comment that he is supposedly “not really interest” in a transitional deal with the E.U. is just an interpretation by the memo taker.

And with regard to Davis’ opinion (from the memo) that the U.K. likely won’t get access to the single market, the spokesman contradicted Davis by saying that:

“With regards to our future relationship with the European Union, the government has repeatedly said that we are seeking the maximum freedom for UK businesses to trade with and operate within the European market.”

ECB’s Coeure speaksAccording to ECB member Benoit Coeure, the ECB’s decision to extend its QE program at a slower pace is a vote of confidence for the Euro Zone’s economy. However, he also said that:

“There are political risks everywhere, inside and outside of the euro zone. It’s not up to the ECB to manage political risks, that’s for the politicians to do. But it’s up to us to draw the economic consequences and the euro zone will still need financial protection to get through 2017, which will be very risky.”

Risk-taking to end the week – Looks like Europe will be closing the week on an upbeat note, since European equity indices notched yet another session of gains.

  • The pan-European FTSEurofirst 300 was up by 0.61% to 1,399.15
  • The blue-chip Euro Stoxx 50 was up by 0.30% to 3,198.00
  • Germany’s DAX was up by 0.28% to 11,209.80

U.S. equity futures were flat, but slightly in positive territory.

  • S&P 500 futures were slightly up by 0.03% to 2,248.50
  • Nasdaq futures were modestly up by 0.13% to 4,869.50

Market analysts say that the upbeat mode was due to strong performance by banking shares, which was fueled by expectations that Monte dei Paschi would be rescued, as well as the ECB’s extended (albeit tapered) QE program.

Major Market Movers:

JPY – The risk-on vibes really put the squeeze on the safe-haven yen. As a result, the safe-haven yen ended up as the weakest currency of the session.

USD/JPY was up by 79 pips (+0.68%) to 115.21, AUD/JPY was up by 42 pips (+0.50%) to 85.92, CAD/JPY was up by 60 pips (+0.69%) to 87.34

EUR – The risk-on mood probably hurt the lower-yielding euro as well. However, market analysts also say that the euro is still reeling from yesterday’s ECB decision.

EUR/USD was down by 65 pips (-0.61%) to 1.0553, EUR/GBP was down by 71 pips (-0.84%) to 0.8382, EUR/CHF was down by 35 pips (-0.33%) to 1.0757

GBP – The pound slumped before the morning London session rolled around, thanks apparently to the leaked memo that was discussed earlier. However, the pound got revived and started climbing higher across the board when the morning London session opened and after Theresa May’s spokesman gave his piece about the leaked memo.

GBP/USD was up by 26 pips (+0.21%) to 1.2589, GBP/JPY was up by 129 pips (+0.90%) to 145.04, GBP/CHF was up by 66 pips (+0.52%) to 1.2831

Watch Out For:

  • 3:00 pm GMT: University of Michigan’s preliminary U.S. consumer sentiment (94.3 expected, 93.8 previous)
  • 3:00 pm GMT: U.S. final wholesale inventories (-0.4% expected, same as previous)

See also:

Asian Session Recap

U.S. Session Recap

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