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Risk aversion returned during today’s morning London session. Even so, the safe-haven Swissy resumed its slide after steadying (and even rising) yesterday.

Meanwhile, recovering oil prices during the session apparently fueled demand for the Loonie. Demand for the pound was also notable, although there was a noticeable loss of bullish momentum on the pound when the U.K.’s construction PMI failed to impress.

  • SECO Swiss consumer climate: -3 as expected, -8 previous
  • Spanish unemployment change: -26.9K vs. -66.5K expected, -98.3K previous
  • Swiss retail sales y/y: 1.5% vs. 1.3% expected, -0.8% previous
  • Swiss manufacturing PMI: 60.9 vs. 58.9 expected, 60.1 previous
  • U.K. construction PMI: 51.9 vs. 54.3 expected, 54.8 previous
  • Euro Zone PPI m/m: -0.1% as expected vs. -0.3% previous

Major Events/Reports

Poor U.K. construction PMI

According to Markit’s latest construction PMI report, the headline reading for U.K. construction PMI slumped from 54.8 to an 11-month low of 51.9 in July. This is a much harder drop compared to the consensus for a soft slide from 54.8 to 54.3.

Commentary from Markit pinned the blame for worse-than-expected drop to “lower volumes of commercial building and a softer expansion of housing activity.”

Moreover, there was “a reduction in new business volumes for the first time since August 2016, which acted as a headwind to job creation and input buying across the construction sector.”

Commodities sink further, but oil resists

Commodities extended their losses during the morning London. And market analysts blamed today’s round of sliding commodity prices on the Greenback’s rise during the past couple of session.

However I just wanna point out that the U.S. dollar index was down by 0.05% to 92.86 for the day when the session ended, so it’s possible that something else is driving the slide.

Anyhow, oil was resisting, as mentioned earlier. And market analysts attributed that to simple bargain-buying and speculation ahead of the official U.S. oil inventory numbers from the EIA later, since available catalysts, such as OPEC OPEC output at 2017 highs, were actually negative for oil.

Precious metals had another bad run, even though risk aversion returned.

  • Gold was down by 0.49% to $1,266.31 per troy ounce
  • Silver was down by 0.63% to $16.659 per troy ounce

Base metals were mixed but most got another beat-down.

  • Copper was down by 0.28% to $2.873 per pound
  • Zinc was down by 0.75% to $2,763.50 per dry metric ton

Oil benchmarks were also in the red earlier but were printing gains near the end of the session.

  • U.S. WTI crude oil was up by 0.08% to $49.20 per barrel
  • Brent crude oil was up by 0.25% to $51.91 per barrel

Risk aversion strikes back

Risk aversion made a comeback during today’s morning London session, sending the major European equity indices into negative territory.

Market analysts blamed the returning risk-off mood on the commodities slide and poor earnings results for banks, which weighed down on mining and financial shares respectively.

  • The pan-European FTSEurofirst 300 was down by 0.24% to 1,490.26
  • Germany’s DAX was down by 0.19% to 12,227.50
  • The blue-chip Euro Stoxx 50 was down by 0.29% to 3,468.50

Major Market Mover(s):

CHF

Risk aversion returned during the morning London session. However, the safe-haven Swissy opted to resume its broad-based slide and was even the worst-performing currency of the session.

There’s no clear reason for the selling pressure on the Swissy. However, last week’s narrative about the unwinding of the safe-haven trade on the Swissy amid growing (expectations of) monetary policy divergence between the ECB and SNB is a possibility. And as usual, SNB meddling is also a possibility.

USD/CHF was up by 33 pips (+0.35%) to 0.9687, EUR/CHF was up by 27 pips (+0.24%) to 1.1457, CAD/CHF was up by 41 pips (+0.54%) to 0.7719

CAD

The Loonie was the top dog of the morning London session, very likely because of the recovery in 0il prices. Other than that, there wasn’t really any direct catalyst for the Loonie’s strength.

USD/CAD was down by 24 pips (-0.19%) to 1.2549, AUD/CAD was down by 25 pips (-0.25%) to 0.9995, NZD/CAD was down by 33 pips (-0.35%) to 0.9321

 GBP

The pound was the second best-performing currency of the session, thanks to cautious optimism ahead of tomorrow’s BOE statement, market analysts say.

Unfortunately for the pound,  the worse-than-expected construction PMI knocked some wind out of the pound’s broad-based rally, which allowed the Loonie to steal a win. Second place ain’t bad, though.

GBP/USD was up by 7 pips (+0.06%) to 1.3223, GBP/CHF was up by 51 pips (+0.40%) to 1.2809, GBP/JPY was up by 19 pips (+0.14%) to 146.42

Watch Out For:

  • 12:15 pm GMT: ADP non-farm employment change (187K expected, 158K previous)
  • 2:30 pm GMT: U.S. crude oil inventories (-3.2M expected, -7.2M previous)