Article Highlights

  • German factory orders m/m: 3.4% vs. 4.0% expected, -6.8% previous
  • Swiss CPI m/m: 0.2% as expected, 0.5% previous
  • Swiss CPI y/y: 0.6% vs. 0.5% expected, 0.6% previous
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Lots of action in today’s morning London session, with the yen in retreat, the Aussie in recovery mode, and the pound weighed down supposedly by Brexit-related jitters. The euro, meanwhile, had decent two-way action but was mostly weaker.

Major Events/Reports:

Dovish Draghi – If you can still recall, there were rumors going around that the ECB talked about hiking rates and the ECB may even actually start hiking soon.

Well, ECB Overlord Draghi gave a speech earlier today, and he apparently refuted the idea that the ECB may be switching to a hiking bias soon.

As for specifics, Draghi said that (emphasis mine):

“[F]rom today’s standpoint, I do not see cause to deviate from the indications we have been consistently providing.”

“[We] have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook – which remains conditional on a very substantial degree of monetary accommodation. Hence a reassessment of the current monetary policy stance is not warranted at this stage.”

Before making any alterations to the components of our stance – interest rates, asset purchases and forward guidance – we still need to build sufficient confidence that inflation will indeed converge to our aim over a medium-term horizon, and will remain there even in less supportive monetary policy conditions.”

ECB meeting minutes – The minutes of the ECB’s March policy huddle got released after Draghi’s speech. And, well, the minutes apparently reinforced Draghi’s monetary policy stance.

True, the minutes showed that “if the euro area economy were to recover further and as inflation proceeded further on its path towards the Governing Council’s inflation aim in a sustained manner, a discussion on policy normalisation would become warranted in the future.”

In the present and over the medium-term, however, “very substantial degree of accommodation … was still needed to secure a sustained convergence of inflation rates towards levels below, but close to, 2% over the medium term.”

Moreover, the minutes revealed that “removing the downward bias on interest rates in the present formulation of the Governing Council’s forward guidance at the current meeting was seen as premature, as there was still considerable uncertainty surrounding the economic outlook and the robustness of inflation convergence.”

Commodities rally – Commodities were broadly in positive territory during the morning London session.

Base metals were in positive territory.

  • Zinc was up by 1.06%% to $2,806.50 per dry metric ton
  • Nickel was up by 0.28% to $10,367.50 per dry metric ton

Oil benchmarks were also in the green.

  • U.S. crude oil was up by 0.45% to $51.38 per barrel
  • Brent crude oil was up by 0.66% to $51.38 per barrel

Precious metals, meanwhile, were also well-supported.

  • Gold was up by 0.45% to $1,254.15 per troy ounce
  • Silver was up by 0.22% to $18.227 per troy ounce

Risk sentiment recovers in Europe – Risk sentiment spill-over apparently caused European equity indices to open broadly and deeply in the red. However, price action shows that European equity indices spent the entire duration of the session by clawing their way higher, which is a sign of recovering risk sentiment.

  • The pan-European FTSEurofirst 300 was only down by 0.14% to 1,495.46 after opening at 1,489.57 earlier.
  • Germany’s DAX recouped its losses and was only down by 0.01% to 12,216.50 after opening at 12,145.75 earlier.
  • The blue-chip Euro Stoxx 50 was already well in the green, since it was up by 0.39% to 3,484.00.

U.S. equity futures were in the green as well.

  • S&P 500 futures were up by 0.13% to 2,349.50
  • Nasdaq futures were up by 0.13% to 5,423.12

Market analysts say that surging real estate stocks led the recovery in European equities, thanks to lower expectations that the ECB may begin tightening. And lowered expectations for an ECB rate hike, in turn, were attributed to ECB Overlord Draghi, especially after Draghi seemingly poured water on that idea in his speech.

Major Market Mover(s):

JPY – The yen was the weakest currency of the session, very likely because of recovering risk sentiment.

USD/JPY was up by 35 pips (+0.32%) to 110.89, GBP/JPY was up by 16 pips (+0.11%) to 138.16, EUR/JPY was up by 20 pips (+0.17%) to 118.22

GBP – The pound was broadly in retreat during the morning London session and ended up as the second weakest currency. There were no apparent catalysts, but some market analysts blamed returning Brexit-related jitters.

GBP/USD was down by 29 pips (-0.23%) to 1.2456, GBP/NZD was down by 49 pips (-0.28%) to 1.7855, GBP/AUD was down by 69 pips (-0.42%) to 1.6475

AUD – The Aussie is still a net loser for the day, thanks to the slide in iron ore prices earlier. Fortunately for Aussie bulls, commodities staged a recovery during the morning London session and risk sentiment improved to boot, which likely helped the embattled Aussie to stage a broad-based recovery.

AUD/USD was down by 13 pips (+0.18%) to 0.7560, AUD/JPY was down by 43 pips (+0.51% ) to 83.84, AUD/CHF was down by 18 pips (+0.24%) to 0.7590

EUR – The euro was mixed for the session but was mostly weaker, thanks to deluge of sellers after Draghi poured water on expectations that the ECB may switch to a hawkish policy bias soon.

EUR/USD was down by 17 pips (-0.16%) to 1.0659, EUR/CHF was down by 13 pips (-0.12%) to 1.0700, EUR/AUD was down by 48 pips (-0.32%) to 1.4099

Watch Out For:

  • 12:30 pm GMT: Canadian building permits (1.4% expected, 5.4% previous)
  • 12:30 pm GMT: U.S. initial jobless claims (251K expected, 258K previous)