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Price action was rather wonky during today’s morning London session since the euro got kicked broadly lower while the Greenback climbed broadly higher, even though there were no major direct catalysts for the two.

Kiwi strength was a theme during the session as well, but that made more sense since risk-taking was the name of the game in Europe.

  • UBS Swiss consumption indicator: 1.54 vs. 1.56 previous
  • French preliminary Q3 GDP q/q: no change from 0.5% as expected
  • French preliminary Q3 GDP y/y: no change from 2.2% as expected
  • Spanish flash CPI y/y: 1.6% vs. 1.7% expected, 1.6% previous
  • Credit Suisse economic expectations: 40.7 vs. 32.0 previous
  • U.K. net lending to individuals m/m: £4.8B vs. £4.3B expected, £5.2B previous
  • U.K. mortgage approvals: 64.6K vs. 65.0K expected vs. 66.2K previous
  • German preliminary HICP m/m: 0.3% vs. 0.2% expected, -0.1% previous
  • German preliminary HICP y/y: 1.8% vs. 1.7% expected, 1.5% previous

Major Events/Reports

Month-end flows?

November is about to end, so some month-end capital flows are to be expected as hedge funds, mutual funds, pension funds, and other large players rebalance their portfolios and/or prepare to make cash distributions.

Also, month-end flows help to explain some of the rather wonky price action during today’s morning London session.

ECB’s financial stability review

The ECB released its latest Financial Stability Review of the Euro Zone earlier.

Most of the ECB’s judgement were was pretty upbeat (and not really new), such as the ECB’s conclusion that “Euro area economic expansion is becoming increasingly resilient, with risks to the outlook broadly balanced.

However, the ECB also talked about the risks associated with a stronger euro.

“The euro exchange rate has strengthened materially over the past six months. A further possible significant strengthening of the euro exchange rate could pose financial stability risks via macro channels (i.e. lower than expected nominal growth) and asset price channels (possibly triggering higher volatility in asset price premia on euro-denominated assets).”

Also, there was this interesting bit arguing against hiking interest rates.

Higher interest rates may trigger concerns about sovereigns’ debt servicing capacity. The main trigger for renewed debt sustainability concerns relates to the possibility of a sudden increase in bond yields, particularly if it takes place without a commensurate improvement in growth prospects.

Commodities feel the pain

Commodities were broadly bleeding out during today’s morning London session, with almost all commodity types printing losses.

The broad-based slide in commodity prices was likely due to the Greenback’s recovery during the session.

And for reference, the U.S. dollar index was already up by 0.03% to 93.23 for the day when the session came to an end. The U.S. dollar index was in negative territory earlier when the session started.

Like yesterday, base metals were down hard and suffered the most.

  • Copper was down by 0.87% to $3.077 per pound
  • Zinc was down by 1.07% to $3,129.00 per dry metric ton

Interestingly enough, precious metals were also down but didn’t suffer as much, despite the risk-on vibes.

  • Gold was down by 0.08% to $1,293.88 per troy ounce
  • Silver was down by 0.09% to $16.807 per troy ounce

Oil benchmarks were also in the red but were actually off their lows for the day.

  • U.S. WTI crude oil was down by 0.19% to $57.88 per barrel but off the day’s low at $57.47
  • Brent crude oil was down by 0.09% to $62.84 per barrel but off the day’s low at $62.50

Base metals suffered the most because of fears that Chinese demand for some base metals may be softening, market analysts say.

As to why oil was in recovery mode, there’s no clear reason for that, but profit-taking ahead of OPEC meeting and the EIA’s upcoming U.S. oil inventories report is a possible reason, especially since oil has been sliding in the past two days.

More risk-taking in Europe

Europe was apparently in a good mood during the morning London session since the major European equity indices were broadly in the green.

And according to market analysts, the optimistic vibes in Europe was due to yesterday’s rumors about the U.K. and the E.U. coming to a meeting of the minds on the Brexit bill that the U.K. has to pay, as well as renewed hopes with regard to U.S. tax reforms.

  • The pan-European FTSEurofirst 300 was up by 0.70% to 1,533.04
  • Germany’s DAX was up by 0.90% to 13,177.00
  • The blue-chip Euro Stoxx 50 was up by 0.73% to 3,611.50

U.S. equity futures were also well-supported, hinting that the risk-on vibes may carry over into the upcoming U.S. session.

  • S&P 500 futures were up by 0.12% to 2,629.25
  • Nasdaq futures were up by 0.10% to 6,426.63

Major Market Mover(s):

EUR

The euro was the worst-performing currency of the morning London session.

And while the euro encountered more sellers after the ECB released its latest financial stability review, the euro was already on its way down about an hour before the ECB released its report.

There was no apparent trigger for the euro’s slide, though, so it’s possible that we’re seeing some month-end flows.

EUR/USD was down by 32 pips (-0.28%) to 1.1835, EUR/CAD was down by 42 pips (-0.28%) to 1.5167, EUR/NZD was down by 12 pips (-0.14%) to 0.8836

USD

The Greenback outpaced the Kiwi and was the best-performing currency of the morning London session.

There were no apparent catalysts, so wonky price action because of month-end flows is  a possibility. Yet another possibility is preemptive positioning ahead of the second estimate for U.S. GDP growth.

Market analysts also pointed to hopes that the U.S. tax reform bill will push through as the reason for the risk-on vibes, though. And that may have also helped to prop up the Greenback.

USD/CHF was up by 18 pips (+0.19%) to 0.9857, USD/CAD was up by 10 pips (+0.08%) to 1.2821, USD/JPY was up by 18 pips (+0.16%) to 111.62

NZD

The Kiwi was bid higher during the session, likely because of the risk-on vibes. The Kiwi was outclassed by the Greenback, however, and had to content itself with second place.

EUR/NZD was down by 45 pips (-0.27%) to 1.7132, AUD/NZD was down by 15 pips (-0.14%) to 1.0968, GBP/NZD was down by 42 pips (-0.22%) to 1.9372

Watch Out For:

  • 1:30 pm GMT: U.S. preliminary GDP (3.2% expected, 3.0% previous) and GDP price index (no change from 2.2% expected); read Forex Gump’s preview here
  • 1:30 pm GMT: New York Fed President William Dudley will speak
  • 2:00 pm GMT: BOE Guv’nah Mark Carney is scheduled to speak
  • 2:45 pm GMT: BOE Deputy Guv’nah David Ramsden will speak in a panel discussion
  • 3:00 pm GMT: Outgoing Fed Head Yellen will testify before the Joint Economic Committee of Congress
  • 3:00 pm GMT: U.S. pending home sales (1.1% expected, 0.0% previous)
  • 3:30 pm GMT: U.S. crude oil inventories (-2.5M expected, -1.9M previous)
  • 7:00 pm GMT: U.S. Fed will release its so-called “Beige Book”
  • 9:45 pm GMT: Building permits in New Zealand (-2.3% previous)