Trading conditions were somewhat subdued during today’s morning London session. However, the comdolls (CAD, NZD, AUD) were busy fighting it out for the top spot, with the Kiwi ultimately coming out on top (for now). The yen meanwhile, was broadly lower, very likely because of the risk-on vibes.
- Italian trade balance: €3.60B vs. €3.41B expected, €5.31B previous
- Euro Zone final HICP y/y: unchanged at 1.4% as expected
- Euro Zone final core HICP y/y: unchanged at 0.9% as expectedB
BOJ Shogun Kuroda had a little presser just before the European session rolled around.
And in that presser, Kuroda noted that inflation is still low because of the deflationary mindset in Japan, which influences inflation expectations and, by extension, sales prices and wages.
Kuroda remained optimistic, though, since he said that the BOJ is already “seeing some data showing inflation expectations not just bottoming out but heading higher.”
However, Kuroda also warned that “we can’t say yet that inflation expectations have completely turned positive … At some point, we expect underlying inflation and inflation expectations to heighten. But that will take some time.”
Another thing worth pointing out is that Kuroda emphasized that the BOJ would only start talking about an exit strategy from its super-loose monetary policy AFTER inflation hits 2% and begins to show signs of stability.
“There’s some distance to achieving 2 percent inflation, so it’s inappropriate to say now specifically how we will exit our ultra-loose monetary policy and how that could affect the BOJ’s financial health. Laying out specific simulations now would only create confusion. We will debate an exit strategy only after 2 percent inflation is achieved and price growth stays there stably.”
And when Kuroda was asked about the BOJ’s bond-buying program specifically, he had this to say:
“The pace of our government bond buying will fluctuate from time to time depending on market conditions. The amount we buy would be determined based on how much is necessary to guide interest rates appropriately. We won’t set in advance the pace of our bond buying.”
Commodities stage a recovery
Commodities got their collective butts kicked this week. Fortunately, commodities were able to stage a recovery during today’s morning London session.
Oil benchmarks were leading the way.
- U.S. WTI crude oil was up by 0.94% to $44.88 per barrel
- Brent crude oil was up by 1.36% to $47.56 per barrel
Base metals were well-supported.
- Copper was up by 0.18% to $2.570 per pound
- Nickel was up by 0.84% to $8,972.50 per dry metric ton
Precious metals were also up, despite the risk-on vibes.
- Gold was up by 0.20% to $1,257.08 per troy ounce
- Silver was up by 0.10% to $16.732 per troy ounce
Aside from profit-taking by the shorts, the U.S. dollar index was down by 0.11% to 97.39 for the day when the session ended. And that, plus the week-long slump, likely made commodities extra attractive for bargain hunters.
As for the noticeably strong demand for oil, market analysts just acknowledge that oil was on the rise but can’t really pinpoint a reason as to why.
Europe regains appetite for risk
After getting hit by a wave of risk aversion yesterday, signs of risk-taking began to show up again during today’s morning London session.
- The pan-European FTSEurofirst 300 up by 0.49% to 1,525.37
- Germany’s DAX was up by 0.32% to 12,732.50
- The blue-chip Euro Stoxx 50 was up by 0.26% to 3,537.50
U.S. equity futures were also in positive territory.
- S&P 500 futures were up by 0.15% to 2,435.75
- Nasdaq futures were up by 0.18 to 5,719.38
Market analysts point out that financial shares were leading the equities rally. And that was apparently thanks to news earlier that European governments and the IMF decided to give Greece an €8.5 billion credit lifeline, which eased uncertainty in Europe by a lot.
Major Market Mover(s):
NZD, AUD, CAD
The commodities recovery very likely gave the comdolls a boost. In addition, it’s also likely that the higher-yielding Aussie and Kiwi got an extra boost from the recovering risk sentiment during the session.
NZD/USD was up by 20 pips (+0.28%) to 0.7231, NZD/JPY was up by 33 pips (+0.42%) to 80.54, NZD/CHF was up by 24 pips (+0.35%) to 0.7051
AUD/USD was up by 20 pips (+0.26%) to 0.7604, AUD/JPY was up by 33 pips (+0.39%) to 84.70, AUD/CHF was up by 24 pips (+0.34%) to 0.7416
USD/CAD was down by 20 pips (-0.23%) to 1.3233, EUR/CAD was down by 26 pips (-0.18%) to 1.4767, GBP/CAD was down by 46 pips (-0.28%) to 1.6887
The yen extended its losses during the session, very likely because of lower safe-haven demand due to the risk-friendly environment in Europe. However, it’s also likely that the earlier BOJ statement is still weighing down on the yen.
USD/JPY was up by 17 pips (+0.15%) to 111.39, CAD/JPY was up by 30 pips (+0.37%) to 84.16, CHF/JPY was up by 10 pips (+0.08%) to 114.21
Watch Out For:
- 12:30 pm GMT: Canada’s foreign security purchases ($12.14B exoected, $15.13B previous)
- 12:30 pm GMT: U.S. housing starts (1,220K expected, 1,172K previous) building permits (1.249M expected, 1,229K previous)
- 2:00 pm GMT: University of Michigan’s preliminary consumer sentiment index (97.2 expected, 97.1 previous)
- 2:00 pm GMT: U.S. labor market conditions index (3.5 previous)
- 4:45 pm GMT: Dallas Fed President Robert Kaplan