Article Highlights

  • Swiss trade balance: CHF 4.73B vs. CHF 3.03B expected, CHF 2.69B previous
  • French final HICP m/m: -0.3% vs. unchanged at -0.2% expected
  • French final HICP y/y: unchanged at 1.6% as expected
  • German manufacturing PMI: 57.0 vs. 56.0 expected, 56.4 previous
  • German services PMI: 54.4 vs. 53.6 expected, 53.4 previous
  • French manufacturing PMI: 52.3 vs. 53.5 expected, 53.6 previous
  • French services PMI: 56.7 vs. 53.9 expected, 54.1 previous
  • Euro Zone manufacturing PMI: 55.5 vs. 55.0 expected, 55.2 previous
  • Euro Zone services PMI: 55.6 vs. 53.7 expected, same as previous
  • U.K. public sector net borrowing: -£9.8B vs. -£14.4B expected, £4.2B previous
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The lower-yielding euro and the safe-haven Swissy had a tough time during today’s risk-friendly morning London. The Loonie, meanwhile, got some love when oil prices jumped.

Major Events/Reports:

Commodities waver, but oil charges higher – Many commodities were in retreat during the morning London session. Oil, however, was clearly going against the tide since it just kept on climbing higher.

Oil benchmarks jumped higher, as mentioned earlier.

  • U.S. crude oil was up by 1.62% to $54.65 per barrel
  • Brent crude oil was up by 1.44% to $56.99 per barrel

Base metals were down, with the exception of copper.

  • Copper was up by 1.26% to $2.741 per pound
  • Nickel was down by 0.69% to $11,080.00 per dry metric ton

Precious metals, meanwhile, got another beating.

  • Gold was down by 0.63% to $1,231.25 per troy ounce
  • Silver was down by 0.73% to $17.898 per troy ounce

The broad-based slide was very likely due to the higher Greenback. And for reference, the U.S. dollar index was up by 0.61% to 101.54 for the day when the session ended. Oh, for the newbies out there, a stronger U.S. dollar means that globally-traded commodities became relatively more expensive and unattactive to buy (but attractive to sell).

As for oil’s defiance, market analysts pointed to OPEC Secretary General Mohammad Barkindo’s statements from earlier, namely these:

“All countries involved remain resolute in the determination to achieve a higher level of conformity.”

“It was evident in the last quarter of 2016 that total OECD commercial oil stocks were falling, and it is expected that we will see a further drop during 2017.”

“We will continue to focus on the level of inventory drawdown to bring the level closer to the five-year industry average.”

Another upbeat day Europe – European equities had a poor start. However, it soon became clear that the risk-friendly sentiment stuck around for another day, since European equity indices erased their earlier losses (and then some).

  • The pan-European FTSEurofirst 300 was up by 0.33% to 1,467.67
  • The blue chip Euro Stoxx 50 was up by 0.35% to 3,326.50
  • Germany’s DAX was also up by 0.58% to 11,896.00

Even U.S. equity futures could feel the love.

  • S&P 500 futures were up by 0.24% to 2,353.75
  • Nasdaq Futures were up by 0.26% to 5,339.63

Market analysts attribute today’s bout of risk-taking to optimistic PMI readings for the Euro Zone and its major economies. Energy shares were also major winners, so the jump in oil prices was likely a factor for the upbeat mood as well.

BOE Carney and company testify – BOE Guv’nah Mark Carney and other top BOE officials testified before the British Parliamentary Committee earlier today. And there were some interesting things that were discussed, but nothing really new.

With regard to employment, BOE Chief Ecoomist Andy Haldane said that “there are more people in jobs than was the case nine months ago and their wages are still going up.” Carney, meanwhile, said that “wages are growing roughly as before, the economy’s growing, so they look through this and it’s right and it’s positive for the economy.”

Overall, pretty positive. However, Haldane would later warn that:

“That is now however about to change a bit as their incomes are squeezed by the rise in prices.”

And there are already signs that real wages are taking a hit, as Forex Gump pointed out in his latest Economic Snapshot for the United Kingdom.

When pressed if the risks to household spending are to the upside or downside, MPC member Gertjan Vlieghe answered that there are risks on both sides. And Carney and MCafferty concurred with this assessment. Haldane, meanwhile, said that there are more downside risks, going back to his statement on income getting squeezed.

Moving on, an MP later tried to ask Carney and friends about the BOE’s forward guidance, asking if rates are going to go up, down, or stay neutral. And, well, Carney simply said that rates are currently neutral but that it might rise quicker or slower than the market expects, which is a very vague answer.

Major Market Movers:

EUR & CHF – The lower-yielding euro and the safe-haven Swissy were the main losers during today’s morning London session, despite the upbeat PMI readings for the Euro Zone and the larger-then-expected trade surplus for Switzerland. There were no apparent catalysts that could have enticed selling pressure for both currencies. However, it’s very likely that both currencies were under pressure because of the risk-on vibes. After all, the Swissy is considered a safe-haven currency. The euro, meanwhile, is a major funding currency, so it acts kinda like a safe-haven currency (even though it’s not).

EUR/USD was down by 45 pips (-0.43%) to 1.0531, EUR/AUD was down by 46 pips (-0.33%) to 1.3755, EUR/NZD was down by 43 pips (-0.30%) to 1.4745

USD/CHF was up by 38 pips (+0.38%) to 1.0098, GBP/CHF was up by 29 pips (+0.24%) to 1.2532, CAD/CHF was up by 32 pips (+0.42%) to 0.7685

CAD – The Loonie had a mixed start, but later got a bullish boost across the board. There were no news or economic reports for Canada, but oil did jump higher as noted earlier, and Loonie pairs appear to be tracking oil prices higher.

USD/CAD was down by 5 pips (-0.04%) to 1.3138, EUR/CAD was down by 62 pips (-0.45%) to 1.3838, GBP/CAD was down by 28 pips (-0.17%) to 1.6306

USD – The Greenback was a net winner during the session, barely losing out only to the Loonie. There were no clear catalysts, but market analysts were pointing to higher rate hike expectations after a couple of Fed officials gave hawkish statements yesterday.

GBP/USD was down by 19 pips (-0.16%) to 1.2409, AUD/USD was down by 8 pips (-0.11%) to 0.7655, NZD/USD was down by 10 pips (-0.14%) to 0.7140

Watch Out For:

  • 1:50 pm GMT: Minneapolis Fed President Neel Kashkari has a speech
  • 2:45 pm GMT: Markit’s U.S. manufacturing PMI (54.7 expected, 55.0 previous)
  • 2:45 pm GMT: Markit’s U.S. services PMI (55.8 expected, 55.6 previous)
  • 3:30 pm GMT: CB’s Australian leading index (0.5% previous)
  • 5:00 pm GMT: Philadelphia Fed President Patrick Harker will speak
  • 9:30 pm GMT: RBA Governor Philip Lowe will be speaking
  • Dairy auction currently underway (1.3% previous); auction usually ends at around 2:00 pm GMT

See also:

Asian Session Recap 
U.S. Session Recap

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