Article Highlights

  • Swiss CPI m/m: -0.1% as expected vs. -0.2% previous
  • Swiss CPI y/y: 0.0% as expected vs. -0.3% previous
  • U.K. services PMI: 56.2 vs. 54.7 expected, 55.2 previous
  • Euro Zone PPI m/m: 0.3% as expected vs. 0.8% previous
  • Euro Zone PPI y/y: 0.1% vs. -0.1% expected, -0.4% previous
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Risk aversion was apparently the dominant sentiment during today’s morning London session, so the higher-yielding Kiwi got slapped lower. The Greenback and the pound, meanwhile, were in recovery mode after getting pummeled by sellers earlier.

Major Events/Reports:

U.K. services PMI improves (again) – Markit’s services PMI report revealed that the U.K.’s services PMI reading for December rose sharply from 55.2 to 56.2 instead of deteriorating to 54.7. The U.K.’s services PMI reading has been improving for three straight months running, with December’s reading being a 17-month high to boot.

According to the PMI report, the higher reading was “fuelled by stronger growth in new work,” with new business growth increasing “at [the] fastest rate since July 2015.”

Additional commentary from Chris Williamson, Markit’s Chief Business Economist, noted that “the PMI surveys point to the economy growing by 0.5% in the fourth quarter.” Williamson also commented that:

“At face value, this improvement suggests that the next move by the Bank of England is more likely to be a rate hike than a cut, but policymakers are clearly concerned about the extent to which Brexit related uncertainty could slow growth this year.”

Commodities still in rally mode (Part 2) – Commodities staged another broad-based rally earlier, and said rally was extended during the morning London session.

Precious metals were in the green.

  • Gold was up by 0.67% to $1,173.10 per troy ounce
  • Silver was up by 0.39% to $16.617 per troy ounce

Base metals, meanwhile, were a bit more mixed, but most were printing gains.

  • Aluminum was up by 0.50% to $1,697.75 per kilogram
  • Nickel was up by 0.44% to $10,247.50 per dry metric ton

As for oil benchmarks, they were clearly in positive territory.

  • U.S. crude oil was up by 0.94% to $53.76 per barrel
  • Brent crude oil was up by 0.97% to $57.01 per barrel

The broad-based commodities rally was likely fueled by another round of Greenback weakness, with the U.S. dollar index down by 0.15% to 102.34 for the day.

However, market analysts also point to earlier reports that China plans to build a $115 billion railway system as one of the major drivers for the commodities rally, particularly that of base metals.

Risk appetite returns and then promptly leaves – Risk appetite apparently made a comeback in Europe, since most of the major European equity indices were in the green when the session rolled around. However, as the session progressed, it became clear that risk appetite left, as the major European equity indices began leaking red one after another.

  • The pan-European FTSEurofirst 300 was still up by 0.08% to 1,444.91, but off its session high of 1,446,08
  • The blue-chip Euro Stoxx 50 was already down by 0.02% to 3,312.50
  • Germany’s DAX was up down 0.27% to 11,553.00
  • The U.K.’s FTSE 100 was down by 0.13% to 7,180.70

U.S. equity futures also felt the risk-off mood.

  • S&P 500 futures were down by 0.19% to 2,260.00
  • Nasdaq futures were down by 0.22% to 4,922.62

According to market analysts, the sour mood during the session was due to bearish pressure on insurance companies after JP Morgan downgraded its ratings for several insurance providers. The risk-off mood was partially offset by demand for mining shares, thanks to rising commodity prices.

Major Market Movers:

NZD – The higher-yielding Kiwi lost across the board. The Kiwi therefore apparently got the worst of the risk-off vibes. Its fellow higher-yielding comdoll, the Aussie, was under pressure as well, but had a more mixed performance, probably because of the 1.8% rise in iron ore prices today.

NZD/USD was down by 40 pips (-0.58%) to 0.6959, NZD/CHF was down by 26 pips (-0.38%) to 0.7089, NZD/CAD was down by 49 pips (-0.53%) to 0.9248

USD – The Greenback is still down for the day, thanks to the yuan surge from earlier, market analysts say. However, the Greenback staged a broad-based recovery during the course of the session. And this recovery allowed the Greenback to emerge as the best performing currency (of the morning London session at least).

EUR/USD was down by 59 pips (-0.56%) to 1.04997, AUD/USD was down by 13 pips (-0.18%) to 0.7289, GBP/USD was down by 18 pips (-0.15%) to 1.2296

GBP – The pound was the second strongest currency of the session, thanks to the better-than-expected reading for the U.K.’s services PMI. Like the Greenback, however, the pound is still broadly in the red for the day. Market analysts blame the pound’s earlier slide partly on Brexit-related jitters after Ivan Rogers, the U.K.’s deputy Brexit negotiator, called it quits earlier while lambasting British PM Theresa May’s Brexit plan.

GBP/JPY was up by 53 pips (+0.37%) to 143.32, GBP/CHF was up by 10 pips (+0.08%) to 1.2532, GBP/NZD was up by 77 pips (+0.44%) to 1.7671

Watch Out For:

  • 1:15 pm GMT: ADP’s U.S. employment survey (174K expected, 216K previous)
  • 1:30 pm GMT: U.S. initial jobless claims (262K expected, 265K previous)
  • 1:30 pm GMT: Canada’s RMPI (-1.8% expected, 3.3% previous)
  • 1:30 pm GMT: Canada’s IPPI (0.5% expected, 0.7% previous)
  • 2:45 pm GMT: Markit’s final U.S. services PMI (no revision from 53.4 expected)
  • 3:00 pm GMT: ISM’s U.S. non-manufacturing PMI (56.8 expected, 57.2 previous)
  • 4:00 pm GMT: U.S. crude oil inventories (-1.8M expected, 0.6M previous)

See also:

Asian Session Recap

U.S. Session Recap

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