Article Highlights

  • French final services PMI: 52.9 vs. steady at 52.6 expected
  • German final services PMI: 54.3 vs. steady at 53.8 expected
  • Euro Zone final services PMI: 53.7 vs. steady at 53.1 expected
  • U.K. construction PMI: 54.2 vs. 52.5 expected, 52.8 previous
  • U.K. net lending to individuals: £5.1B vs. £4.9B expected, same as previous
  • U.K. mortgage approvals: 67.5K vs. 68.5K expected, 67.4K previous
  • Euro Zone flash CPI y/y: 1.1% vs. 1.0% expected, 0.6% previous
  • Euro Zone flash core CPI y/y: 0.9% vs. 0.8% expected, same as previous
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Another round of rallying commodity prices meant that the comdolls were in demand, particularly the Loonie. Returning risk-off vibes, meanwhile, kept the yen supported.

Major Events/Reports:

U.K. construction PMI rises – Instead of sliding from 52.8 to 52.5, Markit’s construction PMI report showed that the U.K.’s December construction PMI reading climbed higher to a nine-month high of 54.2.

The improved reading was mainly due to “the fastest rise in new order volumes since January 2016,” according to the PMI report. However, “the latest rise in overall input costs was the steepest for just over five-and-a-half years.” This was blamed on higher imported raw material prices after the pound depreciated.

The BOE’s Money and Credit report – Earlier today, the BOE released its Money and Credit report for the November period. And according to the report, the number of mortgage approvals came in at 67.5K, fewer than the expected 68.5K, but slightly more than the previous month’s 67.4K figure. The current reading keeps the uptrend steady, and implies that the U.K. housing market is still relatively steady.

Aside from that, net lending to individuals increased by £5.1 billion in November, more than the £4.9 billion that was printed during the previous month. This means that consumer credit is still relatively strong, which is a sign that consumer spending may also still be strong.

Commodities still in rally modeCommodities are still broadly rallying. Unlike yesterday’s commodities rally, however, precious metals were also part of the rally.

As mentioned earlier, precious metals were in positive territory.

  • Gold was up by 0.40% to $1,166.65 per troy ounce
  • Silver was up by 0.45% to $16.483 per troy ounce

Base metals were also in the green.

  • Copper was up by 0.72% to $2.507 per pound
  • Nickel was up by 0.38% to $10,007.50 per dry metric ton

Oil benchmarks, meanwhile, were on the rise, albeit not as strong as yesterday.

  • U.S. crude oil was up by 0.61% to $52.65 per barrel
  • Brent crude oil was up by 0.63% to $55.82 per barrel

The broad-based commodities rally was likely fueled by the cheaper Greenback, given that the U.S. dollar index is down by 0.27% to 102.96 for the day. A weaker Greenback means that commodities priced in U.S. dollars become relatively cheaper and more attractive to buy.

Aside from that, the returning risk-off vibes likely fueled demand for precious metals while market analysts say that some traders are preemptively positioning ahead of an expected drop in U.S. oil inventories.

Risk aversion returns – Risk appetite got banished and risk aversion returned during today’s morning London session, since most of the major European equity indices were moderately in the red.

  • The pan-European FTSEurofirst 300 was down by 0.06% to 1,443.78
  • The blue-chip Euro Stoxx 50 was down by 0.11% to 3,313.50
  • Germany’s DAX was down by 0.36% to 11,542.50
  • The U.K.’s FTSE 100 was down by 0.08% to 7,172.50

Market analysts noted that retailers soured the overall mood, noting that retailers were getting pulled down by U.K. fashion store Next after it reported a fall in sales despite the holiday season.

Major Market Movers:

CAD – All the comdolls (CAD, AUD, NZD) were well-supported during the morning London session. However, demand for the Loonie was particularly high, so much so that it ended up as the one currency to rule them all. There wasn’t any apparent catalyst for the Loonie, but it’s possible that the risk-off vibes dampened demand for the higher-yielding Kiwi and Aussie, allowing the Loonie to shine.

USD/CAD was down by 118 pips (-0.88%) to 1.3318, NZD/CAD was down by 53 pips (-0.57%) to 0.9248, AUD/CAD was down by 58 pips (-0.61%) to 0.9672

JPY – The yen was the second strongest currency of the session. And the yen’s strength likely came from safe-haven flows due to the risk-off vibes.

USD/JPY was down by 48 pips (-0.41%) to 117.51, AUD/JPY was down by 13 pips (-0.16%) to 85.32, NZD/JPY was down by 10 pips (-0.11%) to 81.59

USD – The Greenback was the worst performing currency of the session (and of the day for that matter). There were no direct catalyst, but some market analysts say that the Greenback’s weakness was possibly due to profit-taking and skittishness ahead of top-tier reports this week. That seems reasonable. After all, we do have the FOMC meeting minutes for later, as well as this Friday’s NFP report.

EUR/USD was up by 17 pips (+0.17%) to 1.0434, NZD/USD was up by 21 pips (+0.31%) to 0.6944, AUD/USD was up by 20 pips (+0.28%) to 0.7261

Watch Out For:

  • 7:00 pm GMT: FOMC meeting minutes will be released
  • 10:30 pm GMT: AIG’s Australian services index (51.1 previous)

See also:

Asian Session Recap

U.S. Session Recap

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