The euro-bashing continued for a second day, although the euro found support late into the session when ECB-related rumors made the rounds.
The higher-yielding Kiwi and Aussie, meanwhile, fought bitterly for the top spot during the risk-friendly session. There can be only one, though, and that happened to be the Kiwi.
- German final HICP m/m: unchanged at 0.2% as expected
- German final HICP y/y: unchanged at 1.5% as expected
- French final HICP m/m: unchanged at 0.0% as expected
- French final HICP y/y: unchanged at 0.8% as expected
- Swiss PPI m/m: -0.1% vs. 0.0% expected, -0.3% previous
According to an unnamed source being cited in a Wall Street Journal report, ECB Overlord Draghi will be participating in the U.S. Fed’s Jackson Hole conference in August.
More importantly, Draghi will supposedly use this event to give “a further sign of the ECB’s growing confidence in the eurozone economy and its reduced dependence on monetary stimulus.”
Moreover, unnamed ECB officials supposedly told the Wall Street Journal that “the bank is likely to signal at its Sept. 7 policy meeting that the bond-buying program, known as quantitative easing, will be gradually wound down next year.”
And it just so happens that the Jackson Hole Symposium is just a couple of weeks before the September ECB statement.
Commodities rally more but oil tumbles
Commodities extended their gains during today’s morning London session. The rally was not as broad-based compared to yesterday’s morning London session, though, since oil got left behind this time.
Precious metals got bid higher.
- Gold was up by 0.22% to $1,221.75 per troy ounce
- Silver was up by 0.12% to $15.906 per troy ounce
Base metals advanced further.
- Copper was up by 0.22% to $2.690 per pound
- Nickel was up by 0.38% to $9,237.50 per dry metric ton
Oil benchmarks got whupped and went in the opposite direction.
- U.S. WTI crude oil was down by 0.95% to $45.06 per barrel
- Brent crude oil was down by 1.01% to $47.26 per barrelAside from Chinese demand, market analysts also pointed to Yellen’s cautious testimony and the resulting Greenback weakness as the main reason for the sustained rally.
As to why oil got left behind, market analysts said that was due to the International Energy Agency’s report wherein it was noted that the oil glut may be here to stay for a while because of rising oil output and lack of faith in OPEC’s exended oil cut deal.
More risk-taking in Europe
Appetite for risk persisted for the second day during today’s morning London session, so European equity indices got another bullish boost.
- The pan-European FTSEurofirst 300 was up by 0.45% to 1,521.35
- Germany’s DAX was up by 0.22% to 12,654.75
- The blue-chip Euro Stoxx 50 was up by 0.44% to 3,535.50
U.S. equity futures were also hinting that the risk-on vibes may carry over into the U.S. session.
- S&P 500 futures were up by 0.16% to 2,443.88
- Nasdaq futures were up by 0.30% to 5,803.38
Market analysts say the risk-on mood was due mainly to the strong performance of mining shares, so the commodities rally was apparently the main source of optimism.
Global bond yields fall
I guess the weird, inverse relationship between equities and bond yields is becoming the norm now. Anyhow, global bond yields fell as bond-buying intensified for a second straight day, which is rather wonky since risk-taking was the more dominant sentiment in the European equities and U.S. futures markets.
- French 10-year bond yield down by 4.37% to 0.832%
- German 10-year bond yield down by 3.08% to 0.566%
- U.K. 10-year bond yield down by 1.11% to 1.248%
- U.S. 10-year bond yield down by 0.48% to 2.316%
Market analysts pinned yesterday’s bond yields slump on Yellen’s cautious tone on inflation during her testimony before the House Financial Services Committee yesterday. And market analysts are still blaming Yellen for today’s bond yields slide.
Major Market Mover(s):
The euro has been sliding since yesterday’s U.S. session, apparently because of the slump in Euro Zone bond yields, although some market analysts are also pointing to profit-taking.
The euro did find support late into the session, though, thanks to the Wall Street Journal report I mentioned earlier, which apparently revived expectations that the ECB would be tapering soon.
EUR/USD was down by 37 pips (-0.32%) to 1.1410 with 1.1370 as session low, EUR/AUD was down by 74 pips (-0.50%) to 1.4770 with 1.4706 as session low, EUR/NZD was down by 117 pips (-0.75%) to 1.5573 with 1.5454 as session low
AUD & NZD
There were no apparent catalysts, but the higher-yielding Aussie and the Kiwi were the top-performing currencies of the session, very likely because of the risk-on vibes, commodities rally, and better yield advantage after bond yields started sliding since yesterday.
And between the two, the Kiwi ultimately came out on top and is currently the best-performing currency of the day (so far) as well.
NZD/USD was up by 33 pips (+0.45%) to 0.7327, NZD/JPY was up by 39 pips (+0.48%) to 82.89, NZD/CHF was up by 50 pips (+0.72%) to 0.7067
AUD/USD was up by 15 pips (+0.20%) to 0.7726, AUD/JPY was up by 19 pips (+0.21%) to 87.41, AUD/CHF was up by 19 pips (+0.26%) to 0,7455
Watch Out For:
- 12:30 pm GMT: Canadian NHPI (0.3% expected, 0.8% previous)
- 12:30 pm GMT: U.S. initial jobless claims (245K expected, 248K previous)
- 12:30 pm GMT: Headline (0.0% expected, same as previous) and core (0.2% expected, 0.3% previous) readings for U.S. PPI
- 2:00 pm GMT: Fed Chair Yellen will testify before the Senate Banking Committee
- 5:00 pm GMT: U.S. Fed Governor Lael Brainard will speak
- 6:00 pm GMT: U.S. Federal budget will be released