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The euro and the pound were both down and out for the count during today’s morning London session. And while the risk-off vibes gave the yen and Swissy a boost, the two safe-haven currencies weren’t the top dogs of the session since both lost out to the higher-yielding Kiwi.

  • Spanish manufacturing PMI: 56.0 vs. 56.6 expected, 55.8 previous
  • Swiss manufacturing PMI: 65.1 vs. 62.5 expected, 62.0 previous
  • Italian manufacturing PMI: 58.3 vs. 58.4 expected, 57.8 previous
  • French final manufacturing PMI: 57.7 vs. no change from 57.5 expected
  • German final manufacturing PMI: no change from 62.5 as expected
  • Euro Zone final manufacturing PMI 60.1 vs. no change from 60.0 expected
  • U.K. manufacturing PMI: 58.2 vs. 56.5 expected, same as previous
  • Canada’s jobs report and GDP report coming up; Read Forex Gump’s preview here

Major Events/Reports

U.K. manufacturing PMI

Markit released the U.K.’s November manufacturing PMI report earlier. And according to the report, the headline reading rose to a 51-month high of 58.2, beating expectations that it would hold steady at 56.5.

Commentary from Markit was also very upbeat since the “rates of increase in new orders and production [were] among the best registered over the past four years.”

Even better, growth “remained broad-based,” with strong growth “registered across the consumer, intermediate and investment goods industries.”

New orders for investment goods, in particular, increased “at steepest pace since August 1994.”

And according to anecdotal evidence gathered by Markit, the rise in both output and new orders “reflected solid domestic demand and steeper gains in new export business.”

Higher sales to “Europe, the Americas, Asia and the Middle East” were cited as the main drivers for exports.

And since output and new orders both ramped up, Markits said survey respondents reported higher payroll numbers, “with employment rising to the greatest extent since June 2014.”

The PMI report also found evidence supportive of futher inflationary pressure since “November saw purchasing costs rise at a pace close to October’s seven-month high, reflecting increased commodity prices (including for oil and steel), exchange rate effects and higher vendor prices due to supply-chain constraints.”

More importantly, manufacturing companies are passing on higher costs since “Output charges continued to rise at a substantial clip, the fastest for seven months and among the highest during the past six-and-a-half years.”

Intense risk aversion in Europe

European equity indices welcomed the new month by drowning in a sea of red thanks to an intense bout of risk aversion during today’s morning London session.

And according to market analysts, Europe was suffering from risk sentiment spillover from the earlier sessions. And source of the risk aversion for the earlier sessions, in turn, was disappointment over the delay to the U.S. tax reform bill, which caused financial shares to tank.

  • The pan-European FTSEurofirst 300 was down by 0.65% to 1,509.39
  • Germany’s DAX was down by 1.23% to 12,864.00
  • The blue-chip Euro Stoxx 50 was down by 1.05% to 3,539.50

U.S. equity futures also took and were leaking red.

  • S&P 500 futures were down by 0.46% to 2,635.75
  • Nasdaq futures were down by 0.71% to 6,323.88

Global bond yields plunge

Another sign of the risk-off vibes was the strong demand for bonds that caused global bonds yields to tank hard.

  • German 10-year bond yield down by 15.96% to 0.316%
  • French 10-year bond yield down by 7.58% to 0.633%
  • U.K. 10-year bond yield down by 3.83% to 1.280%
  • U.S. 10-year bond yield down by 1.70% to 2.374%
  • Canadian 10-year bond yield down by 1.27% to 1.861%

Commodities broadly higher

Commodities staged another broad-based rally during today’s morning London session. Precious metals were mixed, however, even though risk aversion was the dominant sentiment in Europe.

Oil benchmarks were raking in gains.

  • U.S. WTI crude oil was up by 0.73% to $57.72 per barrel
  • Brent crude oil was up by 0.91% to $63.20 per barrel

Base metals were broadly in positive territory.

  • Copper was up by 0.46% to $3.078 per pound
  • Zinc was up by 1.58% to $3,207.50 per dry metric ton

Precious metals were a bit mixed since silver was down, despite the risk-off vibes.

  • Gold was up by 0.24% to $1,276.24 per troy ounce
  • Silver was down by 0.13% to $16.361 per troy ounce

Major Market Mover(s):

GBP

The pound got a pounding from the get-go and was the worst-performing currency of the morning London session.

Heck, not even the better-than-expected manufacturing PMI reading was able to turn the pound’s fortunes around.

There were no apparent catalysts for the pound’s weakness, but some market analysts pointed to worries related to the Irish border since that may be a source of conflict between the U.K. and the E.U. when it comes to pushing through with a post-Brexit trade deal.

Of course, another possible reason is profit-taking by pound bulls ahead of Theresa May and Juncker’s meeting on Monday. After all, the pound’s broad-based rally this week was fueled by a report citing unnamed sources that claimed that the E.U. and the U.K. had a meeting of the minds with regard to the Brexit Bill.

GBP/USD was down by 26 pips (-0.19%) to 1.3498, GBP/NZD was down by 107 pips (-0.54%) to 1.9694, GBP/CHF was down by 39 pips (-0.30%) to 1.3269

NZD

The Kiwi stood triumphant against ALL its forex rivals during the session. What’s even more impressive is that the Kiwi was able to win out against the safe-haven yen and Swissy (which were also broadly higher) despite the risk-off vibes.

There’s no clear reason for the Kiwi’s strength. But it’s possible that plunging global bond yields made the higher-yielding Kiwi a more attractive alternative.

NZD/USD was up by 24 pips (+0.36%) to 0.6854, NZD/CHF was up by 17 pips (+0.25%) to 0.6737, NZD/JPY was up by 10 pips (+0.14%) to 77.01

EUR

The euro was the second worst-performing currency of the session after the weak pound, even though mid-tier economic reports released during the session were net positive. Profit-taking after yesterday’s broad-based euro rally is a possible reason for the euro’s dip today, however.

EUR/USD was down by 24 pips (-0.20%) to 1.1891, EUR/CHF was down by 35 pips (-0.30%) to 1.1690, EUR/NZD was down by 94 pips (-0.53%) to 1.7350

Watch Out For:

  • 1:30 pm GMT: Canada’s jobless rate (6.1% expected, 6.2% previous) and net employment change (10.0K expected, 35.3K previous)
  • 1:30 pm GMT: Canada’s September monthly GDP (0.1% expected, -0.1% previous) and Q3 GDP (1.6% expected, 4.5% previous); Read Forex Gump’s preview here
  • 2:30 pm GMT: Canadian manufacturing PMI (54.3 previous)
  • 2:30 pm GMT: Dallas Fed President Robert Kaplan will speak
  • 2:45 pm GMT: Markit’s final U.S. manufacturing PMI (54.0 expected, 53.8 previous)
  • 3:00 pm GMT: ISM’s U.S. manufacturing PMI (58.3 expected, 58.7 previous)
  • 3:00 pm GMT: U.S. construction spending (0.5% expected, 0.3% previous)
  • 3:15 pm GMT: Philadelphia Fed President Patrick Harker will speak