Article Highlights

  • German factory orders m/m: -2.5% as expected, 5.0% previous
  • German retail sales m/m: -1.8% vs. -0.8% expected, 2.5% previous
  • French trade balance: -€4.4B vs. -€4.8B expected, -€5.2B previous
  • Euro Zone retail sales m/m: -0.4% vs. -0.3% expected, 1.4% previous
  • Euro Zone consumer sentiment: unchanged at -5.1 as expected
  • Euro Zone industrial sentiment: 0.1 vs. -0.4 expected, -1.1 previous
  • U.S. NFP report and Canada’s jobs report coming up
  • U.S. and Canadian trade data also coming up
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Price action during today’s morning London session was relatively more subdued and choppier than usual, probably because forex traders were hunkering down for the NFP report.

Major Events/Reports:

NFP Friday! – Today is another NFP Friday! And as usual, price action became relatively more choppy, as volatility got sapped on many pairs, due to forex traders hunkering down ahead of the NFP report.

The upcoming NFP report is the first NFP report after the Fed decided to hike rates back in December, so forex traders are anxious to see if labor market conditions during December were good enough when the Fed did finally decide to hike.

By the way, if you’re planning to trade the top-tier NFP report and need to get up to speed on what happened last time and what’s expected this time, then make sure read up on Forex Gump’s Forex Preview here. While you’re at it, you may also wanna check out Forex Gump’s Forex Preview for Canada’s December jobs report here.

Commodities retreat but oil keeps rising – After broadly rallying hard for a couple of days, commodities finally staged a broad-based retreat. There was one noticeable exception, though – oil.

Precious metals got whupped, despite the risk-off vibes.

  • Gold was down by 0.33% to $1,177.35 per troy ounce
  • Silver was down by 0.63% to $16.532 per troy ounce

Base metals, meanwhile, were mixed, but most got kicked lower.

  • Copper was down by 0.26% to $2.531 per pound
  • Nickel was down by 0.44% to $2,597.25 per dry metric ton

Oil benchmarks were clearly swimming against the tide, as mentioned earlier.

  • U.S. crude oil was up by 0.78% to $54.18 per barrel
  • Brent crude oil was up by 0.81% to $57.35 per barrel

The broad-based commodities retreat was likely due to the Greenback’s recovery, with the USD index up by 0.37% to 101.77 for the day. A stronger Greenback means that globally-traded commodities become relatively more expensive and less desirable to buy (but more desirable to sell).

Demand for oil, meanwhile, was attributed by market analysts to optimism after signs that OPEC members were complying with the oil cut deal.

Pre-NFP skittishness – There were signs of modest risk aversion during the morning London session, since the major European equity indices were in the red.

  • The pan-European FTSEurofirst 300 was down by 0.28% to 1,441.56
  • The blue-chip Euro Stoxx 50 was already down by 0.12% to 3,309.50
  • Germany’s DAX was up down 0.11% to 11,573.00
  • The U.K.’s FTSE 100 was down by 0.14% to 7,185.70

Market analysts point out that mining shares were the main losers, so the risk-off mood was likely due to the commodities slide during the session. Aside from that, it’s also likely that market players were just skittish ahead of the NFP report (as usual).

Major Market Movers:

GBP – The pound’s price action may have been choppy, but it was clear that the pound weakened across the board. There were no apparent catalysts for the pound’s overall weakness. However, Reuters did release a report earlier, showing that 60 forex strategies polled by Reuters believe that the pound will likely tank a bit once the actual Brexit process starts. It’s also possible that Brexit-related jitters that are linked to recent political developments are continuing to weigh down on the pound.

GBP/USD was down by 11 pips (-0.09%) to 1.2366, GBP/AUD was down by 44 pips (-0.27%) to 1.6863, GBP/NZD was down by 59 pips (-0.33%) to 1.7618

NZD & AUD – Despite the risk-off vibes and commodities rout, the higher-yielding Kiwi and Aussie respectively ended up as the best-performing and second best-performing currencies of the session.

There was no apparent reason for this wonky price action. Although it’s possible that market players are still pricing in the Chinese yuan’s surge,  since a stronger yuan means that the Kiwi and Aussie become relatively cheaper. This is good for New Zealand and Australia because China is the main export market of both countries and a relatively cheaper Kiwi and Aussie means that exports from New Zealand and Australia are now a bit more competitive.

AUD/USD was up by 14 pips (+0.20%) to 0.7333, AUD/CHF was up by 16 pips (+0.22%) to 0.7425, AUD/CAD was up by 13 pips (+0.15%) to 0.9724

NZD/USD was up by 18 pips (+0.26%) to 0.7019, NZD/CHF was up by 20 pips (+0.29%) to 0.7107, NZD/CAD was up by 21 pips (+0.22%) to0.9308

Watch Out For:

  • 1:30 pm GMT: U.S. non-farm payrolls (175K expected, 178K previous)
  • 1:30 pm GMT: U.S. jobless rate (uptick from 4.6% to 4.7% expected)
  • 1:30 pm GMT: U.S. average hourly earnings (0.3% expected, -0.1% previous)
  • 1:30 pm GMT: U.S. trade balance (-$42.2B expected, -$42.6B previous)
  • 1:30 pm GMT: Canada’s net change in employment (-5.0K expected, +10.7K previous)
  • 1:30 pm GMT: Canada’s jobless rate (uptick from 6.8% to 6.9% expected)
  • 1:30 pm GMT: Canada’s trade balance (-$1.6B expected, -$1.1B previous)
  • 3:00 pm GMT: Ivey’s Canadian PMI (56.0 expected, 56.8 previous)
  • 3:00 pm GMT: U.S. factory orders (-2.1% expected, 2.7% previous)
  • 5:15 pm GMT: Chicago Fed President Charles Evans has a speech

See also:

Asian Session Recap

U.S. Session Recap

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