Article Highlights

  • German import prices m/m: 0.9% vs. 0.5% expected, 1.9% previous
  • Swiss GDP q/q: 0.1% vs. 0.5% expected, 0.1% previous
  • Swiss retail sales y/y: -1.4% vs. -2.0% expected, -4.1% previous
  • U.K. construction PMI: 52.5 vs. 52.0 expected, 52.2 previous
  • Euro Zone flash HICP y/y: 2.0% vs. 1.9% expected, 1.8% previous
  • Euro Zone flash core HICP y/y: 0.9% as expected, same as previous
  • Jobless rate in the Euro Zone: steady at 9.6% as expected
  • Euro Zone PPI m/m: 0.7% vs. 0.6% expected, 0.8% previous
  • Euro Zone PPI y/y: 3.5% vs. 3.2% expected, 1.6% previous
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We got another relatively steady European session today. The Aussie and the Kiwi got hammered, though, likely because of crumbling commodity prices. The Greenback, meanwhile, steadily climbed higher. As for the pound, it had choppy price action for the most part, but got bid higher later.

Major Events/Reports:

U.K. construction PMI climbs higherMarkit’s construction PMI reading for the U.K. improved from 52.2 to 52.5 in February, instead of deteriorating to 52.0 as expected. According to the PMI report, the “solid upturn in civil engineering activity” was the reason for the higher reading.

Everything wasn’t looking too good for the construction sector, though. Residential building activity, for one, “increased at the slowest pace for six months.” Another is that commercial building construction “declined for the first time since October 2016.” In addition, “incoming new work increased only marginally and at the slowest pace since last October.” Moreover, “sharply rising input costs had an adverse impact on decision-making and contributed to delays in contract completions.”

More Brexit Bill drama – As I noted in yesterday’s London session recap, reports were circulating that peers at the House of Lords wanted to add an amendment that protects the rights of E.U. citizens.

Well, the House of Lords did exactly that, defeating the government by negating the government’s desire to have the Brexit Bill passed without amendments. However, signs that a political “ping pong” may start are pretty low at this point since the Baroness Smith, Labour Party Leader at the House of Lords, already said that if their amendments are overturned, they wouldn’t fight for a second vote.

And while Theresa May’s goverment may have been defeated, Leader of the Commons David Lidington already said earlier that the Brexit Bill was a “straightforward” affair. Lidington then said that MPs at the Commons will “therefore seek to resist changes that would make that negotiating task more difficult.”

Despite this defeat, Theresa May confidently said earlier that her Brexit timetable “remains unchanged.” And for reference, she plans to invoke Article 50 of the TEU by March 15, which is two weeks away. And invoking Article 50 would then start the formal negotiation process for an actual Brexit.

Commodities crumble – Commodities were broadly in the red during today’s morning London session.

Based metals got whupped.

  • Copper was down by 0.95% to $2.710 per pound
  • Nickel was down by 1.06% to $10,920.00 per dry metric ton

Precious metals also got slapped lower.

  • Gold was down by 0.72% to $1,241.00 per troy ounce
  • Silver was down by 0.63% to $18.373 per troy ounce

Oil benchmarks, meanwhile, got torpedoed.

  • U.S. crude oil was down by 1.50% to $53.02 per barrel
  • Brent crude oil was down by 1.44% to $55.55 per barrel

The broad-based commodities rout was very likely because of the Greenback’s earlier strength. And while the Greenback didn’t really do much during this session, the U.S. dollar index was up by 0.30% to 102.05 for the day. For the newbies out there, a stronger U.S. dollar makes globally-traded commodities relatively more expensive, making them unattractive to buy (but attractive to sell).

Aside from that, some market analysts also point to profit-taking in base metals after Trump’s trillion-dollar infrastructure program caused base metals to surge hard yesterday.

As for the drop in oil prices, some market analysts blamed that on the disappointing buildup in U.S. oil inventories, which printed an increase of 1.5 million barrels, putting U.S. oil inventories an an all-time high of 520.2 million barrels. This was apparently taken as a sign that the oil glut is still alive and well.

Major Market Movers:

AUD and NZD – Crumbling commodity prices very likely put the hurt on the Aussie and the Kiwi. Other than that, there weren’t really any major drivers for the weakness of the two currencies. Although it’s also possible that expectations that interest rate differentials would narrow may have weakened the two, given that Fed rate hike expectations increased after hawkish rhetoric from Fed officials.

AUD/USD was down by 56 pips (-0.73%) to 0.7600, AUD/CHF was down by 41 pips (-0.54%) to 0.7694, AUD/JPY was down by 51 pips (-0.58%) to 86.93

NZD/USD was down by 39 pips (-0.55%) to 0.7095, NZD/CHF was down by 23 pips (-0.33%) to 0.7184, NZD/JPY was down by 30 pips (-0.37%) to 81.16

GBP – The pound edged out a win against the Greenback to emerge as the top dog of the session. The U.K.’s contruction PMI reading did improve, but the underlying details were not too good. As such, the pound actually dipped because of that.

There were some Brexit Bill updates, though. And as I noted earlier, the House of Lords probably won’t contest the Commons if the MPs decide to scrap the amendments. Moreover, some MPs are already saying that they will scrap the amendments. As such, Theresa May’s Brexit Bill timeline probably won’t be delayed. And these developments probably caused Brexit-related jitters to easing a bit.

GBP/CHF was up by 38 pips (+0.31%) to 1.2448, GBP/AUD was up by 135 pips (+0.84%) to 1.6175, GBP/NZD was up by 112 pips (+0.66%) to 1.7326

USD – The Greenback steadily extended its gains during today’s morning London session. There were no apparent catalysts. However, the Greenback rally probably is still being sustained by higher rate hike expectations, thanks to hawkish rhetoric from Fed officials during the past sessions.

USD/CAD was up by 16 pips (+0.12%) to 1.3366, USD/JPY was up by 18 pips (+0.16%) to 114.36, USD/CHF was up by 21 pips (+0.21%) to 1.0123

Watch Out For:

  • 1:30 pm GMT: Canada’s monthly GDP growth (0.3% expected, 0.4% previous)
  • 1:30 pm GMT: U.S. initial jobless claims (243K expected, 244K previous)
  • 6:00 pm GMT: BOC Deputy Governor Timothy Lane will speak
  • 10:30 pm GMT: AIG’s Australian services index (54.5 previous)

See also:

Asian Session Recap 
U.S. Session Recap

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