The pound got a major smack-down today, thanks to BOE Boss-man Carney’s speech since Carney explicitly expressed that he is personally a hawk.
Meanwhile, the Swissy had another good run, even though SNB Overlord Jordan was giving a speech earlier wherein he said his usual piece about intervening in the forex market and the Swiss franc being overvalued.
Other than signs of returning risk aversion, there was no clear reason for the Swissy’s strength. Speaking of risk aversion, the returning risk-off vibes also probably fueled demand for the safe-haven yen since the yen gave the Swissy a good fight.
- German PPI m/m: -0.2% vs. -0.1% expected, 0.4% previous
- Euro Zone current account: €22.2B vs. €31.3B expected, €35.7B previous
BOE’s Carney speaks
BOE Boss-man Mark Carney delivered a speech earlier today. And the following is the kicker that, well, apparently kicked the pound lower (emphasis mine):
In short the BOE’s head honcho is clearly saying that he is personally a dove and will not be voting for a hike anytime soon. Carney does clarify that other BOE members have their own views, though, hence the two additional hawks.
“Different members of the MPC will understandably have different views about the outlook and therefore on the potential timing of any Bank Rate increase. But all expect that any changes would be limited in scope and gradual in pace.”
“From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment. In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.”
Even so, Carney points out that the hawks among the BOE members expect tightening would only be “limited in scope and gradual in pace.”
Other than that, Carney also talked about the U.K.’s “historically large current account deficit,” warning that “despite the large depreciation around the referendum, the extent to which the UK’s deficit has moved closer to sustainability remains an open question, one whose answer depends crucially on the outcome of the Brexit negotiations.”
SNB’s Jordan spricht
Carney wasn’t the only top central bank figure who gave a speech today, since SNB Overlord Thomas Jordan also gave a speech.
In his speech, Jordan delivered his usual mantra that the Swissy is significantly overvalued and that the SNB is ready and willing to intervene in the forex market to weaken the Swissy.
Jordan did say something new, though, specifically the following:
“The balance of interests that we always make in this regard speaks very clearly at the moment for continuation of our expansive monetary policy.”
In simpler terms, the SNB is is no hurry to remove its super easy monetary policy, including negative rates.
Commodities clobbered but precious metals resist
Commodities were mostly in the red during today’s morning London session. Precious metals were also initiallty in the red, but they were able to reach positive territory later on, probably because of the risk-off vibes.
Oil benchmarks got hit the hardest.
- U.S. WTI crude oil was down by 2.48% to $43.33 per barrel
- Brent crude oil was down by 2.47% to $45.75 per barrel
Base metals got hammered.
- Copper was down by 1.26% to $2.557 per pound
- Nickel was down by 0.55% to $8,962.50 per dry metric ton
Precious metals swam against the bearish tide, as mentioned earlier.
- Gold was up by 0.14% to $1,248.41 per troy ounce
- Silver was up by 0.21% to $16.536 per troy ounce
Signs of returning risk aversion in Europe
European equity indices opened strong and then had an early burst of optimism that sent them higher still. However, signs of returning risk aversion soon began to show up since European equity indices began surrendering their gains.
- The pan-European FTSEurofirst 300 up by 0.01% to 1,540.88 but reached a high of 1,546.37 earlier
- Germany’s DAX was up by 0.08% to 12,899.75 but reached a high of 12,953.50 earlier,
- The blue-chip Euro Stoxx 50 was already down by 0.11% to 3,580.00
Market analysts say that demand for retail and tech shares was the cause for the earlier risk-on vibes. However, the commodities rout weighed down on mining and energy shares, which later soured overall risk sentiment.
Major Market Mover(s):
The pound got kicked lower across the board, thanks to Carney’s dovish speech. Carney made it clear that he was only talking about his own views and that other BOE members had their own views, but the market took Carney’s words as if Carney was speaking for the BOE as a whole, sending the pound lower (and with follow-through selling to boot).
GBP/USD was down by 69 pips (-0.55%) to 1.2670, GBP/JPY was down by 84 pips (-0.59%) to 141.41, GBP/CHF was down by 92 pips (-0.75%) to 1.2334
CHF & JPY
The safe-haven Swissy and yen were fighting it out for the top spot during the session, probably because of the returning risk-off vibes. The Swissy ultimately won out (during this session at least), however, even though SNB Jordan gave a speech wherein he tried to talk down the Swissy.
USD/CHF was down by 18 pips (-0.19%) to 0.9734, EUR/CHF was down by 25 pips (-0.24%) to 1.0852, CAD/CHF was down by 48 pips (-0.65%) to 0.7332
USD/JPY was down by 6 pips (-0.06%) to 111.58, NZD/JPY was down by 24 pips (-0.30%) to 80.76, AUD/JPY was down by 23 pips (-0.27%) to 84.80
Watch Out For:
- 12:30 pm GMT: Canada’s wholesale sales (0.5% expected, 0.9% previous)
- 12:30 pm GMT: U.S. current account (-$124B expected, -$112B previous)
- 1:00 pm GMT: CB’s leading Chinese index (1.2% previous)
- 7:00 pm GMT: Dallas Fed President Robert Kaplan
- Dairy auction currently underway (+0.6% previous); auction usually ends at around 2:00 pm GMT