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Lots of volatility ahead of the FOMC minutes, but not much in terms of clear directional movement since price action was rather choppy. The Greenback and the Aussie were clear exceptions, though, since the Greenback was broadly stronger while the Aussie was broadly weaker.

As for the other noteworthy currencies, the euro dipped when ECB’s Coeuré gave his speech and closed the session mostly weaker, although price action was very choppy.

The pound also dipped when the U.K.’s services PMI report was released. However, the pound later recovered and even ended up slightly but mostly higher for the session. Pound pairs were essentially range-bound for the day, though.

  • Spanish services PMI: 58.3 vs. 56.6 expected, 57.3 previous
  • Italian services PMI: 53.6 vs. 54.6 expected, 55.1 previous
  • French final services PMI: 56.9 vs. unchanged at 55.3 expected
  • German final services PMI: 54.0 vs. unchanged at 53.7 expected
  • Euro Zone final services PMI: 55.4 vs. unchanged at 54.7 expected
  • U.K. services PMI: 53.4 vs. 53.6 expected, 53.8 previous
  • Euro Zone retail sales m/m: 0.4% as expected vs. 0.1% previous

Major Events/Reports

ECB’s Coeuré peaks

ECB Board Member Benoît Coeuré was in a news briefing earlier. And he bluntly stated the following:

“The Governing Council has not been discussing changes in our monetary policy that may come in the future.”

This was, in effect, a refutation of the market’s interpretation that Draghi’s hawkish comments last week was a hint at the ECB’s plans to tighten/taper in the not-too-distant future.

Coeuré also noted that the euro’s use as a funding currency saw the biggest drop on record, although he was quick to add that “the euro is [still] unchallenged as the second most important currency in the international monetary system.”

U.K. Services PMI

We finally got the U.K.’s services PMI report, which is the last of Markit’s batch of U.K. PMI reports this month. And unfortunately, the U.K.’s services PMI reading was also a miss, albeit only slight (53.4 vs. 53.6 expected, 53.8 previous).

Markit noted that the weaker reading “largely reflected the weakest upturn in new work since September 2016” and that “Anecdotal evidence cited Brexit-related risk aversion and heightened economic uncertainty as key factors holding back client spending.”

BOJ-related rumors

According to unnamed sources being cited in a Reuters report, the BOJ will “cut its inflation forecasts but hold off expanding stimulus this month.”

However, these unnamed sources also added that “The downgrades will likely be minor and reflect the effect of recent oil price falls, companies’ reluctance to raise prices and weak inflation expectations.”

Commodities whupped some more

Commodities had another bad run today. And this time, only gold was left in positive territory.

Precious metals were down, with the exception of gold.

  • Gold was up by 0.14% to $1,220.90 per troy ounce
  • Silver was down by 0.33% to $15.984 per troy ounce

Base metals got another smackdown.

  • Copper was down by 1.15% to $2.662 per pound
  • Nickel was down by 0.93% to $2,766.75 per dry metric ton

Oil benchmarks really felt the pain this time.

  • U.S. WTI crude oil was down by 1.08% to $46.56 per barrel
  • Brent crude oil was down by 0.79% to $49.22 per barrel

The U.S. dollar index was up y 0.21% to 96.19 for the day when the session ended. And that may have sustained the broad-based commodities rout.

With regard to the slide in oil prices, however, market analysts also pointed to earlier news that Russia supposedly said that it would commit to OPEC’s extended oil cut deal but would not agree to further cuts.

Signs of returning risk appetite

Risk aversion made a strong comeback yesterday, but it looks like risk aversion didn’t have a foothold since European equity indices broadly edged higher during the session, which is a sign of returning risk appetite.

  • The pan-European FTSEurofirst 300 was up by 0.08% to 1,504.99
  • Germany’s DAX was up by 0.05% to 12,443.25
  • The blue-chip Euro Stoxx 50 was up by 0.03% to 3,480.58

U.S. equity futures also felt the returning risk-on vibes

  • S&P 500 futures were up by 0.15% to 2,428.75
  • Nasdaq futures were up by 0.29% to 5,605.38

Market analysts say that the returning risk sentiment was due to Credit Suisse upgrading the resource sector to “overweight”. And that allowed mining stocks to edge higher, even though commodities actually got whupped some more during today’s morning London session.

Major Market Mover(s):

USD

The Greenback was the best-performing currency ahead of the release of the FOMC minutes. There were no clear catalysts, but market analysts said that the Greenback’s rise was due mainly to short-covering by Greenback shorts, just in case the minutes have a surprise in store.

USD/JPY was up by 28 pips (+0.25%) to 113.51, USD/CAD was up by 21 pips (+0.16%) to 1.2957, USD/CHF was up by 23 pips (+0.24%) to 0.9663

AUD

The Aussie was the worst-performing currency of the session, very likely because of the commodities rout, since there weren’t really any direct catalysts for the Aussie.

AUD/USD was down by 27 pips (-0.36%) to 0.7599, AUD/JPY was down by 16 pips (-0.19%) to 86.25, AUD/NZD was down by 13 pips (-0.13%) to 1.0446

Watch Out For:

  • 2:00 pm GMT: U.S. factory orders (-0.5% expected, -0.2% previous)
  • 6:00 pm GMT: FOMC meeting minutes scheduled for release