The calendar for today’s morning London session was pretty sparse so forex traders turned to risk sentiment for directional clues.
And since risk-taking prevailed during the session, the higher-yielding Aussie and Kiwi both got a boost while the safe-haven Swissy got a good beating.
Interestingly enough, the yen held its ground and even advanced against some of its peers despite the risk-on vibes. Global bond yields were down during the session, though, and the yen was likely taking directional cues from those.
- No major economic reports were released during the session
Risk-taking prevails in Europe (for now)
The risk-off vibes from the earlier Asian session initially spilled over into the morning London session, knocking the major European equity indices lower.
However, signs of appetite for risk began to pop up and the major European equity indices began reversing their earlier losses and most were already in positive territory by the end of the session.
Although it’s worth pointing out that signs of risk aversion began showing up again later, forcing the major European equity indices to come off their highs.
Even so, the major European bourses were able to hold onto their gains (for now), so risk appetite appears to be the prevailing sentiment (for now).
Anyhow, the earlier risk-off vibes weres attributed by market analysts to jitters related to the slide in Chinese equities.
As for the returning risk-on vibes in Europe, that was attributed to demand for financial shares because of Allianz’s plan to buy out Euler Hermes.
Other than that, market analysts also pointed to easing political jitters because of renewed hopes that a German coalition government may pan out after all.
- The pan-European FTSEurofirst 300 was up by 0.13% to 1,521.77
- Germany’s DAX was up by 0.15% to 13,080.00
- The blue-chip Euro Stoxx 50 was up by 0.25% to 3,590.55
U.S. equity futures were also supported by the risk-on vibes.
- S&P 500 futures were up by 0.09% to 2,603.25
- Nasdaq futures were up by 0.12% to 6,421.13
Global bond yields fall
Despite the risk-on vibes in the European equities market, bonds were in high demand, causing global bonds yields to tumble.
- German 10-year bond yield down by 8.92% to 0.337%
- French 10-year bond yield down by 3.48% to 0.678%
- U.K. 10-year bond yield down by 0.80% to 1.241%
- U.S. 10-year bond yield down by 0.53% to 2.328%
- Canadian 10-year bond yield down by 0.48% to 1.880%
Major Market Mover(s):
NZD & AUD
The higher-yielding Kiwi and Aussie fought for the top-spot during the risk-friendly morning London session.
However, the Kiwi was able to overpower the Aussie near the end of the session when sellers suddenly pounced on the Aussie for no apparent reason.
The Aussie’s loss is the Kiwi’s gain, though, and so the Kiwi ended up as the best-performing currency, not just of the morning London session, but of the trading day (so far) as well.
NZD/USD was up by 31 pips (+0.45%) to 0.6904, NZD/CAD was up by 22 pips (+0.25%) to 0.8759, NZD/CHF was up by 34 pips (+0.51%) to 0.6769
AUD/USD was up by 21 pips (+0.28%) to 0.7633, AUD/CHF was up by 26 pips (+0.35%) to 0.7484, AUD/CAD was up by 9 pips (+0.09%) to 0.9685
The risk-friendly environment may have been great for the higher-yielding Aussie and Kiwi. However, the prevalence of risk-taking was a toxic environment for the safe-haven Swissy, so much so that the Swissy found itself at the bottom of the forex heap.
USD/CHF was up by 7 pips (+0.07%) to 0.9804, EUR/CHF was up by 23 pips (+0.20%) to 1.1710, GBP/CHF was up by 49 pips (+0.38%) to 1.3108
Despite the risk-on vibes, the safe-haven yen was able to put up a good fight against the Aussie and the Kiwi. Heck, the yen was even able to retake some lost ground from the Aussie and Kiwi when signs of risk aversion returned near the end of the session. Moreover, the yen was a net winner during the session.
As to why the yen was resilient despite the prevalence of risk appetite, that’s likely because the yen was taking more directional cues from the falling bond yields during the session.
USD/JPY was down by 32 pips (-0.29%) to 111.04, EUR/JPY was down by 21 pips (-0.16%) to 132.61, CHF/JPY was down by 40 pips (-0.35%) to 113.24
Watch Out For:
- 2:30 pm GMT: BOE MPC Member and Chief Economist Andy Haldane will speak
- 3:00 pm GMT: U.S. new home sales (625K expected, 667K previous)
- 10:30 pm GMT: Minneapolis Fed President Neel Kashkari is scheduled to speak