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Price action was rather choppy during today’s morning London session and many pairs were range-bound. Even so, the pound managed to nudge higher and close out the session on a positive note on all pairs while the Swissy was a loser overall.

  • German retail sales m/m: 1.1% vs. 0.1% expected, 0.5% previous
  • U.K. mortgage approvals: 64.7K vs. 65.0K expected, 65.2K previous
  • U.K. net lending to individuals: £5.6B vs. £4.9B expected, £5.7B previous
  • Euro Zone HICP y/y: 1.3% as expected, same as previous
  • Euro Zone core HICP y/y: 1.2% vs. 1.1% expected and previous
  • Jobless rate in the Euro Zone: 9.1% vs. 9.2% expected, 9.3% previous

Major Events/Reports

Positive Euro Zone data

Eurostat finally released the inflation and employment data for the Euro Zone as a whole earlier today.

As for details, the flash estimate for Euro Zone HICP in July came in at 1.3% year-on-year, which is in-line with the consensus that it would match the previous month’s reading.

The core flash estimate for HICP is a bit better since it came in at 1.2%, which is a tick faster than the consensus that it would also match the previous month’s 1.1% rise.

In addition, this marks the second month of stronger underlying annual inflation for the Euro Zone. Moreover, it’s already hitting the ECB’s 2017 forecast of 1.2%, as laid out in the ECB’s June macroeconomic forecasts.

Moving on, the June jobless rate for the Euro Zone as a whole came in at 9.1%, which is better than the consensus of 9.2%. Even better, the reading for May was also upgraded from 9.2% to 9.1%. Furthermore, the reading of 9.1% is the lowest reading for the jobless rate since February 2009.

It should also be pointed out that the ECB expects the jobless rate for the Euro Zone as a whole to worsen and then settle at 9.4% by the end of the year. As such, the 9.1% reading for the jobless rate is a sign that the labor market is still performing pretty well.

Message from the U.K. PM

A spokesman for U.K. Prime Minister Theresa May told journalists that “Free movement will end in March 2019,” adding that “Other elements of the post-Brexit immigration system will be brought forward in due course, it would be wrong to speculate on what these might look like or to suggest that free movement will continue as it is now.”

This goes against finance minister Hammond’s statement last week that there will likely be a three-year transition period after Brexit negotiations are done by 2019 wherein the U.K. will still be part of the E.U. single market and free movement of people would still be in place.

Upbeat start in Europe

European session market players are a more optimistic bunch compared to their Asian session counterparts since European equity indices were in the green, which signals that risk-taking is the more dominant sentiment in Europe.

Market analysts attributed the optimistic start in Europe to the strong performance of mining shares, as well as positive reports for HSBC, which drove banking shares higher.

  • The pan-European FTSEurofirst 300 was up by 0.30% to 1,490.83
  • Germany’s DAX was up by 0.20% to 12,187.00
  • The blue-chip Euro Stoxx 50 was up by 0.31% to 3,473.50.

U.S. equity futures also got a lift from the risk-on mood in Europe.

  • S&P 500 futures were up by 0.11% to 2,473.00
  • Nasdaq futures were up by 0.21% to 5,922.50

Major Market Mover(s):

 GBP

The pound is actually mixed for the day, but for this session at least, the pound was the one currency to rule them all. U.K. economic reports were released during the session, but they were mixed, so it’s not clear what drove the pound higher.

In addition, Theresa May’s spokesman contradicted Hammond’s statement from last week, which was meant to ease Brexit-related jitters. As such, the spokesman’s statement should have been negative for the pound, and yet the pound rose.

Anyhow, some market analysts were saying that the pound’s broad-based rise during the session was due to cautious optimism that the BOE would maintain its hawkish stance in this week’s BOE statement, so monetary policy expectations is overpowering Brexit-related updates it seems (for now at least).

GBP/USD was up by 10 pips (+0.07%) to 1.3118, GBP/CHF was up by 42 pips (+0.33%) to 1.2718, GBP/NZD was up by 47 pips (+0.27%) to 1.7520

CHF

The Swissy was under bearish pressure for most of duration of the session, very likely because of the risk-on vibes in Europe. SNB meddling is always a possibility, though. Also, it’s possible that some market players are trying to extend last week’s theme of severe Swissy weakness.

USD/CHF was up by 25 pips (+0.26%) to 0.9694, EUR/CHF was up by 21 pips (+0.18%) to 1.1369, CAD/CHF was up by 18 pips (+0.23%) to 0.7777

Watch Out For:

  • 12:30 pm GMT: Canada’s RMPI (-3.2% expected, -1.8% previous) and IPPI (-0.3% expected, -0.2% previous)
  • 1:45 pm GMT: Chicago PMI (60.8 expected, 65.7 previous)
  • 2:00 pm GMT: U.S. pending home sales (0.9% expected, -0.9% previous)