It’s the day before the so-called “Super Thursday” but instead of getting sapped, there was volatility and intraday directional movement aplenty during today’s morning London session, with the Kiwi getting pushed higher by the risk-on vibes and the euro tumbling hard after ECB-related rumors made the rounds.
- German factory orders m/m: -2.1% vs. -0.2% expected, 1.1% previous
- Swiss foreign currency reserves: CHF 694B vs. CHF 697B previous
- U.K. Halifax HPI m/M: 0.4% vs. -0.2% expected, 0.0% previous
- Italian retail sales m/m: -0.1% vs. 0.2% expected, 0.0% previous
According to a Bloomberg report (that’s citing unnamed sources), the ECB is supposedly “preparing to cut its inflation outlook across its forecast horizon at this week’s policy meeting because of weaker energy prices.”
To be more specific, these unnames sources claim that the “ECB’s draft projections now show consumer-price growth at roughly around 1.5 percent each year in 2017, 2018 and 2019.”
The numbers are not yet final, though. Also, there was some silver lining, according to these unnamed sources, because “predictions for economic growth are likely to be revised up by about a tenth of a percentage point.”
Most commodities were bleeding out during today’s morning London session.
Oil benchmarks were sinking.
- U.S. WTI crude oil was down by 0.64% to $47.88 per barrel
- Brent crude oil was down by 0.78% to $49.73 per barrel
Base metals were also in the red.
- Copper was down by 0.27% to $2.540 per pound
- Zinc was down by 0.41% to $2,457.00 per dry metric ton
And the same can be said of precious metals.
- Gold was down by 0.38% to $1,292.62 per troy ounce
- Silver was down by 0.76% to $17.576 per troy ounce
The broad-based commodities rout was probably due to the stronger U.S. dollar, which made commodities relatively unattractive to buy. And for reference, the U.S. dollar index was up by 0.37% to 96.86 for the day when the session ended.
Other than that, market analysts also say that the spat between Qatar and its OPEC neighbors are also still weighing down on oil prices.
Risk appetite returns to Europe
After a few rounds of risk aversion, signs of risk-taking finally retured during today’s morning London session.
- The pan-European FTSEurofirst 300 was up by 0.39% to 1,536.50
- Germany’s DAX was up by 0.12% to 12,705.25
- The blue-chip Euro Stoxx 50 was up by 0.52% to 3,571.00
U.S. equity futures also got some support from the feel-good vibes.
- S&P 500 futures were up by 0.03% to 2,431.50
- Nasdaq futures were up by 0.11% to 5,869.62
According to market analysts, the appetite for risk during the session was due to easing worries over the banking sector, which then spurred demand for banking shares, improving overall sentiment in the process.
And market analysts say that sentiment for the banking sector improved because of the successful rescue of Spain’s embattled Banco Popular, which has been the source of jitters during the past couple of days.
Major Market Mover(s):
The Kiwi was the best-performing currency of the session. Interestingly enough, there were no apparent catalysts and commodities were broadly in decline. However, risk-taking was the dominant sentiment during the morning London session and that likely boosted demand for the higher-yielding Kiwi.
NZD/USD was up by 14 pips (+0.20%) to 0.7191, NZD/JPY was up by 11 pips (+0.14%) to 78.72, NZD/CHF was up by 40 pips (+0.58%) to 0.6953
The euro was mixed but mostly weaker for most of the session, likely because of unwinding by euro longs ahead of tomorrow’s ECB statement. Unfortunately for the euro, fresh sellers charged in and crushed the euro when the Bloomberg report I mentioned earlier got released, since that reinforces the idea that the ECB will likely maintain its easy monetary policy. Also, it very likely spooked speculators who were betting on a more hawkish ECB.
EUR/USD was down by 50 pips (-0.44%) to 1.1214, EUR/AUD was down by 93 pips (-0.62%) to 1.4845, EUR/NZD was down by 109 pips (-0.70%) to 1.5593
The Aussie gave the Kiwi a really hard time and ended up as the second best-performing currency of the session. Like the Kiwi, there was no apparent catalyst for the Aussie, but it’s likely that the risk-on vibes also stoked demand for the higher-yielding Aussie.
AUD/USD was up by 15 pips (+0.20%) to 0.7554, AUD/JPY was up by 12 pips (+0.14%) to 82.69, AUD/CHF was up by 43 pips (+0.60%) to 0.7306
Watch Out For:
- 12:30 pm GMT: Canadian building permits (2.4% expected, -5.8% previous)
- 2:30 pm GMT: U.S. crude oil inventories (-3.1M expected, -6.4M previous)
- 7:00 pm GMT: U.S. consumer credit ($15.2B expected, $16.4B previous)