Article Highlights

  • Swiss jobless rate: steady at 3.3% as expected
  • German industrial production m/m: 2.2% vs. -0.1% expected, 2.2% previous
  • German trade balance: €21.0B vs. €19.4B expected, €18.9B previous
  • French industrial production m/m: -1.6% vs. 0.5% expected, -0.2% previous
  • French trade balance: -€6.6B vs. -€4.9B expected, -€8.1B previous
  • Halifax U.K. HPI m/m: 0.0% vs. 0.2% expected, 0.1% previous
  • U.K. manufacturing production m/m: -0.1% vs. 0.3% expected, -0.9% previous
  • U.K. industrial production m/m: -0.7% vs. 0.2% expected, -0.3% previous
  • Construction output in the U.K. m/m: -1.7% vs. 0.1% expected, 0.0% previous
  • U.K. goods trade balance: -£12.5B vs. -£10.9b expected, -£12.0B previous
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Price action during the morning London session was a bit more subdued compared to the earlier sessions, probably because traders were hunkering down for the upcoming NFP report. The pound and the Greenback were clearly on the move, though.

Major Events/Reports:

NFP Friday! – Today is another NFP Friday! And as usual, both directional movement and volatility were both relatively subdued. Well, relative to the previous sessions anyway, since there was still some price action, namely from pound pairs.

By the way, if you’re planning to trade the NFP report and need to get up to speed on what happened last time and what’s expected this time, then make sure read up on Forex Gump’s Forex Preview here.

Disappointing U.K. data – A slew of economic reports for the U.K. were released during the session. And most unfortunately (for pound bulls), they were all misses.

To begin with, Halifax Bank of Scotland’s HPI showed that housing prices stagnated between the months of February and March. This is a miss from the consensus of a +0.2% month-on-month increase. Also, house prices in the three months to March were only up by 0.1%, which is “the lowest quarterly rate of change since October 2016.” Year-on-year, house prices printed a 3.8% increase, which is “the lowest rate since May 2013.”

Next, industrial production in the U.K. fell by 0.7% month-on-month in February. This marks the second month of contractions, misses the consensus for a 0.2% rise, and is the worst reading in four months to boot. Not only that, all industries printed declines in output. Mining and quarrying output, for instance, fell by 2.0%. Manufacturing production, meanwhile, slightly dipped by 0.1%. As for construction output, it fell by 1.7%. Year-on-year, industrial production only increased by 2.8%, which is slower than the previous 3.3% increase, as well as a significant miss from the expected 3.7% increase.

Moving on, U.K. trade also looks bad, since the U.K.’s trade gap widened from £2.98 billion to £3.66 billion in February. The wider trade gap was due in part to the goods trade deficit widening to £12.5 billion. Also, total exports fell by 0.7% month-on-month while imports rose by 0.6%.

BOE Carney speaks – BOE Guv’nah Mark Carney gave a speech at Thomson Reuters HQ in London earlier. He did talk a bit about Brexit, saying that “there are risks to financial stability both in the transition to the new relationship and in the new steady state.”

As to what these risk are, Carney said they include “disruption of services, a further weakening of investment banking profitability and the potential for greater complexity in firms’ legal structures.”

He didn’t really talk about monetary policy, but in the Q&A session, he was asked to comment about it and he replied as follows:

“Our central forecast has some modest withdrawal of monetary stimulus over the course of the next few years. There is risk to both sides of that.”

In short, monetary policy bias is still neutral but looking to hike in the future. Nothing really new then. Although Carney warned that “[There] are some signs of [strong consumer demand] coming off slowly. That’s what we expect but we’ll monitor it and ensure that we chart the right path.”

Commodities rally more, but base metals fall – Commodities staged another rally during today’s morning London session. Unlike yesterday, however, the rally was not as broad-based, since most base metals went in the opposite direction.

Oil benchmarks extended their gains.

  • U.S. crude oil was up by 1.30% to $52.37 per barrel
  • Brent crude oil was up by 0.78% to $55.31 per barrel

Precious metals were still in high demand.

  • Gold was up by 1.07% to $1,266.65 per troy ounce
  • Silver was up by 0.96% to $18.422 per troy ounce

Base metals, meanwhile, were mostly leaking red.

  • Copper was down by 0.98%% to $2.632 per pound
  • Nickel was down by 0.87% to $10,020.00 per dry metric ton

There was no apparent catalyst for the broad-based commodities rally, and the U.S. dollar index was up by 0.14% to 100.75 for the day when the session ended. However, precious metals were likely in demand because of safe-haven flows.

Meanwhile, the rise in oil prices was apparently linked by to the U.S. missile strike in Syria. Although market analysts admit that there’s really no fundamental reason for oil to rise. After all, the target was a military airfield, not an oil production facility, and Syria only produces around 0.04% of total global oil anyway. Still, some market analysts tried to explain oil’s bullish reaction by pointing out that Syria is near the other major oil producers like Iran and Iraq.

As for the broad-based slide in base metals, market analysts blamed that on profit-taking and the massive slump in Chinese steel, which dragged base metals with it.

Some risk aversion to end the week – European equity indices got swamped by risk aversion today, since most of them were in negative territory.

  • The pan-European FTSEurofirst 300 was down by 0.41% to 1,493.86
  • Germany’s DAX was down by 0.52% to 12,167.00
  • The blue-chip Euro Stoxx 50 was down by 0.27% to 3,483.00.

U.S. equity futures also took hits.

  • S&P 500 futures were down by 0.19% to 2,349.25
  • Nasdaq futures were down by 0.17% to 5,413.38

Quite naturally, most market analysts are still pointing to geopolitical events, particularly the earlier U.S. missile strike in Syria as retaliation for Syria’s alleged chemical attack on beautiful babies.

However, some market analysts also note that banking and mining shares were the main losers. As such, Draghi’s not-so-hawkish comment on monetary policy from yesterday appears to still be weighing down on European banking shares. Meanwhile, the slide in based metals apparently poisoned sentiment for mining shares.

Major Market Mover(s):

GBP – The pound had a mixed start, but got swarmed by sellers when a cocktail of disappointing economic reports got released. And while Carney affirmed the BOE’s neutral (with hints of hawkishness) policy bias, his speech didn’t really provide any support to the pound. And that’s probably because Carney noted that consumer demand in the U.K. was slipping. In addition, Carney also highlighted some Brexit-related risks.

GBP/USD was down by 45 pips (-0.37%) to 1.2419,  GBP/AUD was down by 63 pips (-0.38%) to 1.6501, GBP/CAD was down by 52 pips (-0.31%) to 1.6657

USD – The Greenback scored small wins against its forex rivals during the session. There were no apparent catalysts, but it’s possible that preemptive positioning (or unwinding) ahead of the NFP report sent the Greenback higher.

USD/CAD was up by 10 pips (+0.08%) to 1.3413, USD/JPY was up by 18 pips (+0.17%) to 110.69, USD/CHF was up by 18 pips (+0.18%) to 1.0062

Watch Out For:

  • 12:30 pm GMT: Canada’s net employment change (5.7K expected, 15.3K previous) and jobless rate (6.7% expected, 6.6% previous)
  • 12:30 pm GMT: U.S. non-farm payrolls (175K expected, 235K previous), jobless rate (steady at 4.7% expected), and average hourly earnings (0.2% expected, same as previous)
  • 2:00 pm GMT: Canada’s Ivey PMI (56.3 expected, 55.0 previous)
  • 2:00 pm GMT: U.S. final wholesale inventories (0.1% expected, -0.1% previous)
  • 4:15 pm GMT: New York Fed President William Dudley has a speech