The yen easily dominated its forex rivals during today’s morning London session, thanks to falling bond yields and the prevalence of risk aversion. Meanwhile, the euro, spent the session by grudgingly giving back some of its gains from yesterday.
- U.K. public sector net borrowing: £6.3B vs. £4.3B expected, £6.4B previous
- Canada’s CPI and retail sales reports coming up
Earlier today, there was a Reuters report that cited four unnamed sources “with direct knowledge of the discussion” at the ECB as saying that “It wouldn’t be smart to expect too much in September.”
This, of course, is within the context of when the ECB may start to discuss tapering or “adjusting” its QE program.
These unnamed sources also added that “All the signs are pointing to October” because “There will be little to decide on in September… and December is just too far out.”
Commodities climb but oil falls
Commodities were broadly in demand during today’s morning London session. It wasn’t a one-way street, though, since oil was going in the other direction.
Market analysts attributed the broad-based commodities rise to the Greenback’s weakness since that would make globally-traded commodities relatively cheaper.
And for reference, the U.S. dollar index was down by 0.13% to 93.96 for the day when the session ended.
As to why oil was in retreat, market analysts couldn’t really pinpoint a reason.
Precious metals raked in some gains.
- Gold was up by 0.16% to $1,247.44 per troy ounce
- Silver was up by 0.12% to $16.364 per troy ounce
Base metals outperformed.
- Copper was up by 1.18% to $2.748 per pound
- Zinc was up by 1.54% to $2,770.00 per dry metric ton
Oil benchmarks got slapped lower instead.
- U.S. WTI crude oil was down by 0.85% to $46.52 per barrel
- Brent crude oil was down by 0.79% to $48.91 per barrel
Downer ending in Europe
European equity indices made a U-turn and erased their gains yesterday, thanks to the ECB presser. And unfortunately for European equity indices, aversion to risk is still the dominant sentiment during today’s morning London session.
Market analysts are pointing mainly to poor earnings reports. But they’re also still blaming yesterday’s ECB presser since that stoked speculation of tightening financial conditions (i.e. goodbye easy credit) and caused the euro to surge higher, which is bad for export-oriented European companies.
- The pan-European FTSEurofirst 300 was down by 0.35% to 1,503.66
- Germany’s DAX was down by 0.86% to 12,340.50
- The blue-chip Euro Stoxx 50 was down by 0.69% to 3,472.50
U.S. equity futures also got weighed down by all that doom and gloom.
- S&P 500 futures were down by 0.06% to 2,469.88
- Nasdaq futures were down by 0.20% to 5,913.38
Global bond yields plunge
Global bond yields were down in the dumps as demand for bonds ramped up, with European bonds in focus.
Market analysts attributed this to Draghi’s attempts to sound dovish during yesterday’s ECB presser, particularly the part where Draghi stressed that he didn’t want monetary conditions to tighten too much (e.g. higher bond yields) because that would be bad for the Euro Zone economy.
- French 10-year bond yield down by 4.73% to 0.747%
- German 10-year bond yield down by 5.61% to 0.505%
- U.K. 10-year bond yield down by 1.33% to 1.191%
- U.S. 10-year bond yield down by 1.02% to 2.243%
- Canadian 10-year bond yields down by 0.49% to 1.873%
Major Market Mover(s):
The safe-haven yen ruled over all during today’s morning London session, very likely because the yen got a double boost from falling bonds yields and the prevalence of risk aversion.
USD/JPY was down by 21 pips (-0.19%) to 111.55, GBP/JPY was down by 24 pips (-0.16%) to 144.98, CAD/JPY was down by 30 pips (-0.33%) to 88.55
After skyrocketing yesterday, the euro opened its parachute and grudgingly drifted lower during today’s session.
There was that Reuters report I mentioned earlier, which pushed back when the ECB would likely make a move from September to October and resulted in the euro getting slapped lower as a reaction.
However, the euro’s slide already started before that. No clear reason why, although profit-taking by short-term traders to avoid weekend risk is a possibility.
EUR/USD was down by 20 pips (-0.18%) to 1.1642, EUR/JPY was down by 48 pips (-0.37%) to 129.87, EUR/CHF was down by 25 pips (-0.22%) to 1.1052
Watch Out For:
- 12:30 pm GMT: Headline (-0.1% expected, 0.1% previous) and core (0.1% previous) readings for Canada’s CPI
- 12:30 pm GMT: Headline (0.3% expected, 0.8% previous) and core (0.0% expected, 1.5% previous) readings for Canadian retail sales