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The Kiwi and the Aussie were in retreat during the morning London session while the Swissy was broadly in demand. Strangely enough, there were no direct catalysts for all three currencies, but the risk-off vibes ahead of the FOMC statement may have been a factor.

Meanwhile, the pound tried to climb higher on the better-than-expected construction PMI reading. However, the pound ended up mixed (with choppy price action), very likely because renewed Brexit worries continue to put a cap on the pound.

  • German unemployment change: -15K vs. -10K expected, -30K previous
  • U.K. construction PMI: 53.1 vs. 52.1 expected, 52.2 previous
  • Euro Zone flash GDP: 0.5% as expected vs. 0.4% previous
  • Euro Zone PPI: -0.3% vs. 0.1% expected, 0.0% previous
  • U.S. ADP report coming up
  • FOMC statement later

Major Events/Reports:

U.K. construction PMI better-than-expected

Markit released another PMI report for the U.K. earlier today. Specifically, Markit released the U.K.’s April construction PMI report. And it was great because the reading climbed from 52.2 to a four-month high of 53.1.

In addition, commentary from Markit was upbeat overall. For example, April printed “the strongest upturn in incoming new work so far this year, which survey respondents linked to the resilient economic backdrop and a sustained improvement in client demand.” Another is that the “rate of employment growth was the strongest since May 2016.”

Construction activity for all building types increase, but “Civil engineering was the best performing sub-category of construction activity in April, with the rate of expansion the fastest since March 2016.”

Brexit drama continues

The pound has been feeling some bearish pressure this week, even though there have been positive economic reports. And that’s thanks mainly to renewed Brexit-related worries over the soap opera that started on Sunday.

And in today’s episode, Brexit Secretary David Davis told the press that “We will not be paying €100 billion,” referring to the obligations that the U.K. has to settle in order to leave the E.U.

Davis also threatened to walk out of the negotiation process by saying that “Theresa [May] said no deal is better than a bad deal. This morning you see demands for €100 billion in the papers. It has gone from €50 billion, to €60 billion to €100 billion.”

Davis eased up a bit, though, saying that: “In the walkaway circumstance there is nothing to pay. But nobody is looking for that outcome. We want a deal. We think we can get a deal.”

U.K. elections update

Panelbase released its latest poll results earlier during the session. And unfortunately, it showed that voting intentions for Theresa May’s Conservatrive Party fell by 2% to 47%. Worse still, the Labour Party advanced by 3% to 30%, narrowing the gap between the two.

Skittish risk sentiment in Europe

European equity indices were slightly yet broadly in the red during today’s morning London session.

  • The pan-European FTSEurofirst 300 was down by 0.09% to 1,526.26
  • Germany’s DAX was down by 0.12% to 12,493.50
  • The blue-chip Euro Stoxx 50 was down by 0.02% to 3,577.50

U.S. equity futures also felt the heat.

  • S&P 500 futures were down by 0.12% to 2,383.00
  • Nasdaq futures were down by 0.22% to 5,627.38

Aside from the usual skittishness ahead of an FOMC statement, market analysts blamed the slight risk aversion to underwhelming corporate earnings reports for European companies.

Major Market Mover(s):

AUD & NZD

The higher-yielding Aussie extended its losses during the morning London session, with the Kiwi following suit. Commodities were mixed but iron ore was down and that may probably helped to sustain the Aussie’s weakness.

However, the higher-yielding Kiwi was also in retreat. There were no direct catalysts for the Kiwi, but the risk-off vibes that prevailed during the session probably weighed down on the Kiwi (and the Aussie as well).

NZD/USD was down by 16 pips (-0.23%) to 0.6924, NZD/JPY was down by 12 pips (-0.15%) to 77.65, NZD/CAD was down by 21 pips (-0.23%) to 0.9501

AUD/USD was down by 13 pips (-0.18%) to 0.7475, AUD/JPY was down by 8 pips (-0.11%) to 83.84, AUD/CAD was down by 18 pips (-0.18%) to 1.0257

CHF

The risk-off vibes may have been unkind to the higher-yielding Aussie and Kiwi, but that likely sent safe-haven flows towards the Swissy since it managed to close out the session on a high note against all its peers.

USD/CHF was down by 10 pips (-0.10%) to 0.9901, AUD/CHF was down by 20 pips (-0.26%) to 0.7401, NZD/CHF was down by 23 pips (-0.34%) to 0.6855

Watch Out For:

  • 12:15 pm GMT: U.S. ADP non-farm employment change (178K expected, 263K previous)
  • 1:45 pm GMT: Markit’s final U.S. services PMI (no change from 52.5 expected)
  • 2:00 pm GMT: ISM’s non-manufacturing PMI (56.1 expected, 55.2 previous)
  • 2:30 pm GMT: U.S. crude oil inventories (-3.3M expected, -3.6M previous)
  • 6:00 pm GMT: FOMC rate decision and statement (target range for Fed Funds Rate expected to be raised from 0.50%-0.75% to 0.75%-1.00%)