Article Highlights

  • Spanish services PMI: 57.4 vs. 57.2 expected, 57.7 previous
  • Italian services PMI: 52.9 vs. 54.3 expected, 54.1 previous
  • French final services PMI: 57.5 vs. 58.5 expected, 58.5 previous
  • German final services PMI: unchanged at 55.6 as expected
  • Euro Zone final services PMI: 56.0 vs. unchanged at 56.5 expected
  • U.K. services PMI: 55.0 vs. 53.4 expected, 53.3 previous
  • ADP report coming up
  • FOMC meeting minutes later
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The London session followed the Asian session’s lead, since trading conditions remained relatively tight ahead of top-tier items for the U.S., including the FOMC meeting minutes. The session wasn’t a complete snooze fest, however, since the pound jumped when the U.K.’s services PMI printed an upside surprise. In addition, the yen also showed some broad-based weakness.

Major Events/Reports:

U.K. services PMI beats expectations – The U.K.’s manufacturing and construction PMI readings were both disappointing. Fortunately, the U.K.’s services PMI reading printed an upside surprise earlier today.

According to Markit, the U.K.’s services PMI reading for March stands at 55.0, which is significantly better improvement compared to the expected rise from 53.3 to 53.4. In addition, the reading for March is the best reading for this year (so far).

Commentary from Markit noted that the sudden rise in headline services PMI was due to “business activity and incoming new work both rising at the strongest rates so far in 2017.” And these, in turn, were “linked to supportive UK economic conditions and greater client demand.” In addition, business sentiment in the service sector remained high, with “almost half of the survey panel forecasting growth while only one-in-nine expect a fall in activity.”

On a more downbeat note, job creation in March was “the weakest recorded since August 2016.” Moreover, “intense cost pressures continued in March, which led to the fastest rise in prices charged by service sector firms since September 2008.” But on a more optimistic note, faster price increases may prompt other BOE officials to join Kristin Forbes in the hawkish camp.

Commodities in demand (except precious metals) – Commodities scored another broad-based win during today’s morning London session. Precious metals were not among them, however.

Base metals were in high demand.

  • Copper was up by 1.49%% to $2.651 per pound
  • Nickel was up by 2.38% to $10,232.50 per dry metric ton

Oil benchmarks were well supported.

  • U.S. crude oil was up by 1.16% to $51.62 per barrel
  • Brent crude oil was up by 1.22% to $54.83 per barrel

Precious metals, meanwhile, got dumped.

  • Gold was up down 0.30% to $1,254.65 per troy ounce
  • Silver was down by 0.25% to $18.277 per troy ounce
  • The U.S. dollar index was slightly down by 0.08% to 100.34 for the day when the session ended, which may have helped stoke demand for commodities. However, market analysts also say that base metals were in extra high demand because of returning Chinese buyers after Chinese markets closed for a two-day holiday.

Oil, meanwhile, got an extra boost from bullish speculators who are hoping that official oil inventory numbers from the U.S. Energy Information Administration (EIA) would print a reduction later, according to market analysts.

Risk aversion creeps back in – European equity indices had another strong start, since there were signs of risk appetite at the start. However, those signs began to fade later on.

  • The pan-European FTSEurofirst 300 was down by 0.02% to 1,497.54
  • Germany’s DAX was down by 0.52% to
  • The blue-chip Euro Stoxx 50 was down by 0.07% to 3,476.50

U.S. equity futures also felt some bearish pressure.

  • S&P 500 futures were down by 0.11% to 2,354.00
  • Nasdaq futures were down by 0.12% to 5,437.38

The early signs of risk-taking was due to higher energy and mining shares, market analysts say. The returning risk-off vibes, meanwhile, was probably due to skittishness ahead of top-tier items for the U.S. later, which include the FOMC meeting minutes.

Bond yields surge – Despite signs of risk aversion, bond yields actually surged during the session, which means that bonds were being sold.

  • French 10-year bond yield up by 1.30% tp 0.933%
  • German 10-year bond yield up by 10.63% to 0.281%
  • U.K. 10-year bond yield up by 2.81% to 1.099%
  • U.S. 10-year bond yield up by 0.98% to 2.373%

Market analysts pointed mostly to technical reasons, since bonds were supposedly overbought. As such,  a correction was expected, sending yields higher.

Major Market Mover(s):

GBP – Like yesterday, the pound dipped before the morning London session rolled around, probably because of preemptive positioning ahead of another U.K. PMI report. Unlike yesterday, however, the U.K.’s services PMI printed an upside surprise, so the pound got bid higher during the course of the session.

GBP/USD was up by 57 pips (+0.46%) to 1.2494, GBP/JPY was up by 101 pips (+0.73%) to 136.64, GBP/NZD was up by 91 pips (+0.51%) to 1.7910

CHF – Swissy pairs were range-bound for most of the session. However, the Swissy got swamped by sellers late into the session. As a result, Swissy pairs broke out of their intraday ranges while ending up as one the weakest currencies of the session to boot.

There were no apparent catalysts and risk aversion was the more dominant sentiment. However, it’s possible that the SNB was up to its old tricks again. Buyers were waiting, though, and gave Swissy bears a hard time.

USD/CHF was up by 11 pips (+0.12%) to 1.0030, EUR/CHF was up by 12 pips (+0.12%) to 1.0711, GBP/CHF was up by 70 pips (+0.56%) to 1.2531

JPY – Risk aversion prevailed, but the yen was the weakest currency of the session. Heck, it was even weaker than the Swissy, although price action was also muted. As to why the yen was in retreat, that was likely due to the rise in bond yields.

USD/JPY was up by 26 pips (+0.24%) to 110.94, CAD/JPY was up by 31 pips (+0.38%) to 82.88, CHF/JPY was up by 22 pips (+0.20%) to 110.61

Watch Out For:

  • 12:15 pm GMT: ADP non-farm employment change (184K expected, 298K previous)
  • 1:45 pm GMT: Markit’s final U.S. services PMI (revision from 52.9 to 53.1 expected)
  • 2:00 pm GMT: ISM’s U.S. non-manufacturing PMI (57.0 expected, 57.6 previous)
  • 2:30 pm GMT: U.S. crude oil inventories (-0.1M expected, 0.9M previous)
  • 6:00 pm GMT: FOMC meeting minutes scheduled for release