Article Highlights

  • German WPI m/m: 1.2% vs. 0.1% previous
  • German WPI y/y: 2.8% vs. 0.8% previous
  • U.S. retail sales report coming up; read Forex Gump’s trading guide here
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There was volatility aplenty during today’s morning London session. However, directional movement was another story, with choppy or two-way price action on many pairs. The Greenback was broadly weak, though, while the Aussie was broadly in retreat, likely because of the commodities rout.

Major Events/Reports:

Commodities crumbleCommodities got routed during today’s morning London session.

Precious metals got whupped.

  • Gold was down by 0.20% to $1,197.35 per troy ounce
  • Silver was down by 0.19% to $16.793 per troy ounce

Base metals, meanwhile, were kicked lower.

  • Copper was down by 0.77% to $2.651 per pound
  • Nickel was down by 1.28% to $10,122.50 per dry metric ton

As for oil benchmarks, they were leaking red.

  • U.S. crude oil was down by 1.02% to $52.47 per barrel
  • Brent crude oil was down by 1.00% to $55.45 per barrel

There was no clear reason for the broad-based commodities retreat and the U.S. dollar index was down by 0.32 to 101.14 for the day. However, commodities did have a good run this week, so we’re likely seeing some profit-taking to avoid weekend risk.

Although with regard to oil, some market analysts say that oil is under pressure because of doubts over the effectiveness of OPEC’s oil cut deal. This is supposedly made worse by renewed worries from the demand side of the oil equation after China reported a slump in exports.

Risk appetite returns – Risk appetite apparently made a comeback today, since the major European equity indices were mostly in the green.

  • The pan-European FTSEurofirst 300 was up by 0.60% to 1,441.26
  • The blue-chup Euro Stoxx 50 was up by 0.76% to 3,314.50
  • Germany’s DAX was up by 0.62% to 11,592.00
  • The U.K.’s FTSE 100 was up by 0.35% to 7,317.75

The upbeat mood even helped to prop up U.S. equity futures

  • S&P 500 futures were up by 0.13% to 2,266.50
  • Even Nasdaq futures were up by 0.20% to 5,044.63

Market analysts note that goods news for Fiat and UBI Banca spurred demand for auto and banking shares respectively, which then improved overall risk sentiment.

BOE credit conditions survey – The BOE released its quarterly Credit Condtions Survey for Q4 2016 earlier. And according to the report, “overall demand for corporate lending from small and medium-sized businesses decreased significantly in Q4.” And the reason cited for this was the “Significant reductions in capital investment and commercial real estate.” On a slightly more upbeat note, “merger and acquisitions activity has pushed up on demand.” In addition, “demand for secured lending for house purchase increased slightly in Q4.”

BOE’s Saunders speaks – MPC Member Michael Saunders gave a speech today. And according to the text of his speech, Saunders is “conscious of historical episodes whereby overly optimistic assessments of slack were followed by a prolonged inflation pickup.” And “if pay and other labour market guides give clear warning signs in coming months,” then “This would probably have obvious implications for monetary policy, unless downside risks to economic growth rise significantly.” That last bit is a hawkish hint.

Major Market Movers:

USD – After recovering during yesterday’s U.S. session, the Greenback resumed its retreat today. And as usual, market analysts are blaming the Greenback’s slide on persistent disappointment over Trump’s presser.

USD/JPY was down by 23 pips (-0.20%) to 114.46, USD/CHF was down by 13 pips (-0.13%) to 1.0075, USD/CAD was down by 7 pips (-0.06%) to 1.3139

AUD – The Aussie was broadly in retreat and competed with the Greenback for the (dis)honor of the being the worst performing currency of the session. There were no direct catalysts, but it is very likely that Aussie pairs got weighed down by the commodities rout.

AUD/NZD was down by 21 pips (-0.20%) to 1.0512, AUD/JPY was down by 20 pips (-0.24%) to 85.73, AUD/CHF was down by 12 pips (-0.16%) to 0.7546

GBP – The pound had a mixed performance during the session. Pound pairs initially climbed higher before falling back again during the later half of the session. The initial rise was likely due to hints of hawkishness in Sauders’s speech, as well as some optimistic signs from the BOE’s credit conditions survey, given that the decline in investment was widely expected. Brexit and all that, you know. However the later decline is a bit more mysterious. Some market analysts say that pound bulls were just spooked, though, after it was confirmed that Theresa May will be giving her Brexit negotiations plan next Tuesday.

GBP/USD rose to a session high of 1.2232 but closed only 6 pips higher (+0.05%) to 1.2173, GBP/JPY rose to a session high of 140.27 but closed 20 pips lower (-0.14%) to 139.35, GBP/CHF rose to a session high of 1.2328 but closed 10 pips lower (-0.09%) to 1.2264

Watch Out For:

  • 1:30 pm GMT: Headline (0.3% expected, 0.4% previous) and core (0.1% expected, 0.4% previous) readings for U.S. PPI
  • 1:30 pm GMT: Headline (0.7% expected, 0.1% previous) and core (0.5% expected, 0.2% previous) readings for U.S. retail sales
  • 3:00 pm GMT: University of Michigan’s preliminary consumer sentiment (98.5 expected, 98.2 previous)
  • 3:00 pm GMT: U.S. business inventories (0.6% expected, -0.2% previous)

See also:

Asian Session Recap 
U.S. Session Recap

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