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Price action during today’s morning London session was rather choppy and both volatility and directional movement were hard to come by.

The Loonie was an exception, though, since it clawed its way higher against its peers. The pound, meanwhile, was steady for most of the session but got whupped near the end, apparently as a reaction to the OBR’s downgraded growth forecasts.

  • OBR downgrades ALL U.K. GDP growth forecasts
  • The minutes of the most recent FOMC meeting will be released later
  • New Zealand’s retail sales report also later; read Forex Gump’s preview

Major Events/Reports

OBR’s Autumn Forecast

U.K. Chancellor of the Exchequer Philip Hammond stood before Parliament earlier (and is still standing as I type), and declared that the U.K. economy “continues to grow, continues to create more jobs than ever before and continues to confound those who talk it down.”

Hammond then revealed the Office of Budget Responsibility’s (OBR) fresh forecasts. And well, it was quite disappointing since the OBR drastically downgraded ALL its GDP growth forecasts, as you can see below.

  • 2017 GDP: revised lower to +1.5% (+2.0% originally)
  • 2018 GDP: revised lower to +1.4% (+1.6% originally)
  • 2019 GDP: revised lower to +1.3% (+1.7% originally)
  • 2020 GDP: revised lower to +1.3% (+1.9% originally)
  • 2021 GDP: revised lower to +1.5% (+2.0% originally)
  • 2022 GDP: 1.6% (new forecast)

Hammond is still actually talking before Parliament. And if you’re interested, you can watch him live here.

ECB-related rumors

According to a Reuters report, “five sources with direct knowledge of the discussion” at the ECB told Reuters that the ECB has no plans to make further monetary policy moves anytime soon.

To quote these sources directly:

“We of course always discuss policy, but I don’t expect a substantial discussion before March or possibly mid-year.”

“It’s now scheduled to go until the end of September and we’ll make the next decision relatively close to that.”

One of the unnamed sources also said that:

“The first rate hike is now priced in for late 2019, and I’m comfortable with that.”

Commodities mostly higher, oil outperforms

Commodities staged another broad-based rally during today’s morning London session. Today’s commodities rally was a tad more interesting, though, since oil benchmarks clearly outperformed while base metals were more mixed.

The commodities rally was likely sustained by the Greenback’s weakness. And for reference, the U.S. dollar index was down by 0.15% to 93.75 for the day when the session was about to end.

Other than profit-taking, there was no clear reason why some base metals shed their gains, though.

As for oil’s strong performance, particularly U.S. WTI, market analysts pointed to supply problems because related to the Keystone pipeline, as well as speculation that the U.S. Energy Information Administration’s (EIA) crude oil inventories report will print a fall in inventories later.

Precious metals did well enough, even though risk appetite was the more dominant sentiment.

  • Gold was up by 0.21% to $1,284.35 per troy ounce
  • Silver was up by 0.17% to $16.988 per troy ounce

Base metals were mixed today.

Copper was down by 0.05% to $3.127 per pound

Zinc was up by 0.54% to $3,237.00 per dry metric ton

As mentioned earlier, oil benchmarks clearly outperformed, especially U.S. WTI.

  • U.S. WTI crude oil was up by 1.76% to $57.84 per barrel
  • Brent crude oil was up by 0.88% to $63.19 per barrel

Mixed start but risk appetite prevalent

The European equity indices opened mixed. However, it soon became apparent that risk appetite was the more dominant risk sentiment since the equity indices that opened lower began recovering from their losses while the equity indices that opened higher raked in more gains.

Market analysts attributed the risk-on vibes to risk sentiment spillover from the earlier Asian session, with the narrative about optimism over signs of stronger global growth being cited as the reason for the overall risk-friendly environment.

  • The pan-European FTSEurofirst 300 was up by 0.35% to 1,530.90
  • Germany’s DAX was still down by 0.02% to 13,164.75 but off session lows at 13,110.50
  • The blue-chip Euro Stoxx 50 was up by 0.40% to 3,593.50

U.S. equity futures were also in positive territory, which is another sign that risk appetite was the prevailing sentiment.

  • S&P 500 futures were up by 0.12% to 2,599.25
  • Nasdaq futures were up by 0.15% to 6,388.88

Global bond yields higher

Yet another sign that of the risk-on vibes was the broad-based rise in global bond yields.

  • German 10-year bond yield up by 4.31% to 0.363%
  • French 10-year bond yield up by 3.45% to 0.686%
  • U.K. 10-year bond yield up by 1.41% to 1.294%
  • U.S. 10-year bond yield up by 0.47% to 2.372%
  • Canadian 10-year bond yield up by 0.68% to 1.932%

Major Market Mover(s):

CAD

For what it’s worth (given the muted and choppy price action on most CAD pairs), the Loonie was the best-performing currency of the session, likely because of the surge in oil prices.

USD/CAD was down by 12 pips (-0.10%) to 1.2746, GBP/CAD was down by 57 pips (-0.34%) to 1.6851, EUR/CAD was down by 33 pips (-0.22%) to 1.4967

GBP

The pound traded roughly sideways and had mixed price action during the course of the session. However, the pound got swamped by sellers near the end, apparently as a reaction to the painful revelation that the OBR drastically downgraded ALL of the U.K.’s GDP growth forecasts.

GBP/USD was down by 33 pips (-0.25%) to 1.3220, GBP/NZD was down by 43 pips (-0.22%) to 1.9336, GBP/AUD was down by 55 pips (-0.31%) to1.7447

EUR

The euro was the second worst-performing currency of the morning London session, even though there were no apparent catalysts. There were ECB-related rumors and the euro reacted negatively. However, the euro was already showing signs of weakness before the Reuters report was released.

EUR/USD was down by 15 pips (-0.13%) to 1.1742, EUR/JPY was down by 13 pips (-0.11%) to 131.62, EUR/CHF was down by 21 pips (-0.18%) to 1.1607

Watch Out For:

  • 1:30 pm GMT: Headline (0.3% expected, 2.2% previous) and core (0.5% expected, 0.7% previous) readings for U.S. durable goods orders
  • 1:30 pm GMT: U.S. initial jobless claims (240K expected, 249K previous)
  • 3:00 pm GMT: University of Michigan’s consumer sentiment index (98.0 expected, 97.8 previous)
  • 3:00 pm GMT: Euro Zone consumer confidence index (-0.9 expected, -1.0 previous)
  • 3:30 pm GMT: U.S. crude oil inventories (-1.4M expected, 1.9M previous)
  • 7:00 pm GMT: Minutes of the latest FOMC meeting will be released
  • 9:45 pm GMT: Headline (0.4% expected, 2.0% previous) and core (0.9% expected, 2.1% previous) readings for New Zealand’s quarterly retail sales; read Forex Gump’s preview here