Article Highlights

  • French jobless rate: 10.0% vs. 9.8% expected, 10.1% previous
  • Italian trade balance: €5.80B vs. €4.00B expected, €4.19B previous
  • U.S. housing data coming up
  • New Zealand’s quarterly retail sales report for later
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Not much on the docket for today’s morning London session, so forex traders apparently turned to the risk-off vibes for direction, since the higher-yielders got dumped while the safe-havens were in demand. The Greenback, meanwhile, extended its losses.

Major Events/Reports:

Most commodities rise, but base metals fall – Most commodities were in the green today, but base metals went against the bullish tide.

Precious metals were well-supported.

  • Gold was up by 0.51% to $1,239.35 per troy ounce
  • Silver was up by 0.54% to $18.060 per troy ounce

Oil benchmarks were also in positive territory.

  • U.S. crude oil was up by 0.49% to $53.37 per barrel
  • Brent crude oil was up by 0.59% to $56.08 per barrel

Base metals were mixed, but most were leaking red, as mentioned earlier.

  • Copper was down by 0.42% to $2.729 per pound
  • Zinc was down by 0.94% to $2,841.00 per dry metric ton

The broad-based commodities rally was likely due to the weaker Greenback. And for reference, the U.S. Dollar Index was down by 0.39% to 100.69 for the day when the session ended.

The risk-off vibes also very likely spurred demand for precious metals. They are considered as traditional safe-havens after all. Oil, meanwhile, got an extra lift from OPEC-related rumors, which I’ll be discussing below. As for the slide in base metals, that was attributed by market analysts to the poor readings for overseas investment in China.

OPEC-related rumors – As mentioned earlier, there were OPEC related rumors floating around during the session. To be more specific, Reuters released a report that cited unnamed “OPEC sources.” And according to Reuters, “OPEC could extend its oil supply-reduction pact with non-members or even apply deeper cuts from July if global crude inventories fail to drop to a targeted level.”

Risk sentiment flips back to risk-off – Risk appetite made a comeback yesterday, but was promptly chased off today. As a result, the European equity indices were in the red again.

  • The pan-European FTSEurofirst 300 was down by 0.35% to 1,459.89
  • The blue chip Euro Stoxx 50 was down by 0.45% to 3,312.50
  • Germany’s DAX was also down by 0.25% to 11,764.00
  • The U.K.’s FTSE 100 was down by 0.35% to 7,277.00

The downbeat mood in Europe also apparently weighed down on U.S. equity futures.

  • S&P 500 futures were down by 0.15% to 2,347.00
  • Nasdaq futures were down by 0.02% to 5,308.88

Market analysts blamed the switch to risk aversion on the poor performance of mining shares and poor earnings reports, especially for British manufacturer Cobham.

Bond yields plunge – Another sign of the risk-off vibes was the heavy buying of global bonds, which caused bond yields to plunge.

  • Japanese 10-year bond yield was down by 1.05% to 0.094%
  • German 10-year bond yield was down by 5.26% to 0.360%
  • Italian 10-year bond yield was down by 1.20% to 2.220%
  • U.K. 10-year bond yield was down by 1.92% to 1.276%
  • U.S. 10-year bond yield was down by 1.21% to 2.472%

Major Market Movers:

JPY & CHF – The safe-haven Swissy and yen were both in demand during the session, thanks to the very clear signs of risk aversion. And between the two, the yen came out on top, albeit by a very small margin.

USD/JPY was down by 37 pips (-0.33%) to 113.55, EUR/JPY was down by 9 pips (-0.08%) to 120.82, CAD/JPY was down by 11 pips (-0.12%) to 87.16

USD/CHF was down by 36 pips (-0.36%) to 1.0005, EUR/CHF was down by 9 pips (-0.09%) to 1.0646, CAD/CHF was down by 10 pips (-0.14%) to 0.7680

USD – The Greenback extended its losses during the session. Market analysts are still pointing to post-Yellen profit-taking from a variety of reasons, which include falling U.S. bond yields, a correction after an 11-day rally, and disappointment over the drop in U.S. industrial output (among other things). By the way, if you missed Yellen’s testimonies, Forex Gump has a rundown on the key points from testimonies, and you can read it here.

USD/CAD was down by 28 pips (-0.21%) to 1.3025, GBP/USD was up by 16 pips (+0.13%) to 1.2500, EUR/USD was up by 29 pips (+0.28%) to 1.0641

AUD & NZD – The prevalence of risk aversion meant that the higher-yielding Aussie and Kiwi competed with one another for the (dis)honor of being the weakest currency of the session. The Kiwi ultimately ended up as the biggest loser of the session, though, probably because traders were also preemptively positioning or unwinding their bets ahead of New Zealand’s quarterly retail sales report. Well, either that or Aussie shorts were taking some profits off the table after the details of Australia’s jobs report turned out to be a disappointment.

AUD/JPY was down by 25 pips (-0.29%) to 87.51, AUD/CAD was down by 14 pips (-0.13%) to 1.0040, AUD/CHF was down by 23 pips (-0.39%) to 0.7711

NZD/JPY was down by 32 pips (-0.39%) to 81.96, NZD/CHF was down by 29 pips (-0.40%) to 0.7222, NZD/CAD was down by 25 pips (-0.27%) to 0.9403

Watch Out For:

  • 1:30 pm GMT: U.S. building permits (1.23M expected, 1.21M previous) and housing starts (1.23M expected, same as previous)
  • 1:30 pm GMT: U.S. initial jobless claims (245K expected, 234K previous) and Philadelphia Fed survey (18.0 expected, 23.6 previous)
  • 3:30 pm GMT: Business NZ manufacturing index will be released (54.5 previous)
  • 9:30 pm GMT: Headline (1.1% expected, 0.9% previous) and core (0.9% expected, 0.3% previous) readings for retail sales in New Zealand set for release

See also:

Asian Session Recap 
U.S. Session Recap

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