Article Highlights

  • Swiss trade balance: CHF 2.72B vs. CHF 3.50B previous
  • German GFK consumer sentiment: 10.2 vs. 10.0 expected, 9.9 previous
  • Spain’s jobless rate: 18.6% vs. steady at 18.9% expected
  • Italian retail sales m/m: -0.7% vs. 0.1% expected, 1.2% previous
  • BBA’s U.K. mortgage approvals: 43.23K vs. 41K expected, 40.66K previous
  • U.K. Q4 GDP q/q: 0.6% vs. 0.5% expected, 0.6% previous
  • U.K. Q4 GDP y/y: 2.2% vs. 2.1% expected, 2.2% previous
  • British government publishes Brexit Bill
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The safe-haven Swissy surged during today’s morning London session, even though risk appetite was the dominant sentiment. The pound and the yen, meanwhile, got a severe beat-down.

Major Events/Reports:

Brexit Bill published – In his write-up from yesterday, Forex Gump cited rumors that a Bill to get parliamentary approval to start the actual Brexit process could be released as early as today. And, well, those rumors were apparently right since the British government did just that today. And according to The Guardian, the process would be as follows:

“David Lidington, the leader of the Commons, told MPs they would have five days to debate the issue. The second reading debate would take place over two days, on Tuesday and Wednesday next week, he said. The key second reading vote will be on Wednesday. Parliament will sit until midnight on the Tuesday, Lidington said. The following week, Monday, Tuesday and Wednesday will be set aside for the committee and report stages and for the third reading. The bill will then go to the Lords.”

As The Guardian also notes, some MPs, particularly Labour MPs, were complaining at the rather tight timetable, saying that it’s “a disgrace” and “shows contempt for parliamentary sovereignty.” Interesting times ahead, huh?

Preliminary Q4 2016 U.K. GDP report – The Office for National Statistics (ONS) finally released its Q4 2016 GDP report earlier during the session. And the actual readings were able to beat the consensus readings to match their respective previous readings, with Q2 GDP growing by 0.6% quarter-on-quarter (0.5% expected, 0.6% previous) and 2.2% on an annual basis (2.1% expected, 2.2% previous).

However, it should be noted that the previous quarter’s quarterly reading was upgraded from +0.5% to +0.6%. Meanwhile, the year-on-year got downgraded from +2.3% to +2.2%. And on a more downbeat note, total growth for 2016 was 2.0%, which is slower than 2015’s 2.2%. Moreover, this is the slowest pace of expansion since 2013.

Anyhow, a quick look at the details of the report shows that the steady reading in Q4 was due essentially to the service sector, since the contribution from production and construction were neutral.

Commodities fall while oil rises – Commodities were broadly in retreat again during today’s morning London session. Oil was a noticeable exception, however.

Precious metals got whupped.

  • Gold was down by 0.74% to $1,188.95 per troy ounce
  • Silver was down by 0.87% to $16.832 per troy ounce

Base metals were also reeling.

  • Copper was down by 0.37% to $2.700 per pound
  • Nickel was down by 1.18% to $9,622.50 per dry metric ton

Oil benchmarks, meanwhile, were swimming against the red current.

  • U.S. crude oil was up by 0.32% to $52.92 per barrel
  • Brent crude oil was up by 0.87% to $55.56 per barrel

The broad-based slide in commodity prices was very likely due to the stronger Greenback. And for reference, the U.S. dollar index was up by 0.39% to 100.30 for the day when the session ended. No clear reason for the rise in oil prices, though.

Another upbeat day in Europe – There was risk-taking aplenty in Europe today, with practically all European equity indices well in the green.

  • The pan-European FTSEurofirst 300 was up by 0.44% to 1,454.38
  • The blue-chup Euro Stoxx 50 was up by 0.04% to 3,332.50
  • Germany’s DAX was up by 0.42% to 11,855.25
  • The U.K.’s FTSE 100 was up by 0.13% to 7,173.50

U.S. equity futures were also in the green.

  • S&P 500 futures were up by 0.03% to 2,294.75
  • Nasdaq futures were up by 0.19% to 5,156.38

Market analysts attributed the risk-on mood mainly to optimism over merger and acquisition activities, as well as sentiment spill-over from the Asian session. And the upbeat mood in Asia, in turn, was attributed to the DOW closing above the 20,000 mark on strong earnings and optimism on Trump’s fiscal plans.

Bond yields jump – Another sign of risk-on mood was the jump in bond yields during the session.

  • French 10-year bond yield up by 2.96% tp 1.008%
  • German 10-year bond yield up by 2.78% to 0.480%
  • Italian 10-year bond yield up by 3.65% to 2.188%
  • U.K. 10-year bond yield up by 1.90% to 1.498%
  • U.S. 10-year bond yield up by 0.73% to 2.542%

Major Market Movers:

CHF – Even though risk appetite appeared to be the dominant sentiment, the safe-haven Swissy ended up ruling them all. There was no clear reason for this weirdness. Moreover, the only Swiss economic report that was released during the session was a miss. However, it’s possible that renewed Brexit fears sent forex traders scurrying to the Swissy. And all the more so, given that the yen was undesirable because of the surge in yields.

USD/CHF was down by 10 pips (-0.10%) to 0.9986, AUD/CHF was down by 30 pips (-0.41%) to 0.7522, EUR/CHF was down by 29 pips (-0.27%) to 1.0696

JPY – The yen’s price action has been closely linked to bond yields recently, with the yen gaining strength when bond yields fall and retreating when bond yields rise. And since bond yields were surging during the session, the yen ended up as the weakest currency of the session.

USD/JPY was up by 65 pips (+0.57%) to 114.41, CHF/JPY was up by 74 pips (+0.66%) to 114.55, EUR/JPY was up by 45 pips (+0.37%) to 122.52

GBP – The pound started the session on a strong footing, likely because of preemptive positioning ahead of the U.K.’s GDP report. However, the pound ended up sinking ever lower after the GDP report got released. There were some disappointing points to the GDP report, but it was good overall. The slide was therefore likely due to profit-taking by the bulls who got in early. In addition, it’s also likely that the pound got hit by renewed Brexit fears due to bickering by MPs on the Brexit Bill. And other Brexit-related news during the session, such as “Brexit fallout to hit Britain in 2017, 2018,” certainly didn’t help improve sentiment for the pound.

GBP/USD was down by 58 pips (-0.46%) to 1.2570 with 1.2673 as session high, GBP/CHF was down by 69 pips (-0.55%) to 1.2554 with 1.2646 as session high, GBP/CAD was down by 27 pips (-0.17%) to 1.6500 with 1.6583 as session high

Watch Out For:

  • 1:30 pm GMT: U.S. initial jobless claims (247K expected, 234K previous)
  • 1:30 pm GMT: U.S. goods trade balance (-$65.3B expected, -$66.6B previous)
  • 2:45 pm GMT: Markit’s flash U.S. services PMI (54.4 expected, 53.9 previous)
  • 3:00 pm GMT: U.S. new home sales (585K expected, 592K previous)
  • 3:00 pm GMT: CB’s U.S. leading index (0.5% expected, 0.0% previous)

See also:

Asian Session Recap 
U.S. Session Recap

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