The pound was steady for most of the session but got a major bullish infusion near the end when comments from MEPs boosted hopes that Brexit talks will proceed to Phase 2, which refers to trade talks.
Meanwhile, the safe-haven Swissy was feeling a bit under the weather because of the risk-on vibes. These same risk-on vibes propped up the comdolls, however. Although the Loonie somehow managed to outpace its peers despite falling oil prices.
- Spanish unemployment change: 7.3K vs. 54.3K expected, 56.8 previous
- Sentix Euro Zone consumer confidence: 31.1 vs. 33.4 expected, 34.0 previous
- U.K. construction PMI: 53.1 vs. 51.2 expected, 50.8 previous
- Euro Zone PPI m/m: 0.4% as expected vs. 0.5% previous
Positive Brexit-related updates
Lots of Brexit-related headlines were flying about during the morning London session, which isn’t surprising since British PM Theresa May’s is meeting with European Commission President Jean-Claude Juncker and E.U. top Brexit negotiator Michel Barnier today.
Anyhow, E.U. top Brexit negotiator Michel Barnier briefed MEPs earlier before meeting with Theresa May. And some of these MEPs shared hints of what they learned.
German MEP Elmar Brok said that there was a “very good chance for a deal” and even said that he was “astonished” with the progress of the negotiations.
Belgian MEP Philippe Lamberts, meanwhile, quoted Barnier as saying that a breakthrough in Brexit talks was possible.
And according to a BBC report, Lamberts even said that “the UK had made a concession on the Irish border,” as BBC puts it.
There was also this encouraging tweet from European Council President Donald Tusk late into the session.
— Donald Tusk (@eucopresident) December 4, 2017
By the way, the Independent is running real-time Brexit-related updates, which you can check out here. The Guardian is also doing the same, so check out the Guardian’s stuff here, if you’re interested.
U.K. construction PMI
The U.K.’s construction PMI jumped from 50.8 to a five-month high of 53.1 in November.
And according to commentary from Markit, business activity rose “at the strongest rate since June.” Moreover, “New orders and employment numbers also increased to the greatest extent in five months.”
However, other commentary weren’t as upbeat since Markit noted that “the improvement in construction growth was largely confined to residential work.”
Not only that, there were “sustained reductions in commercial building and civil engineering, with the latter now experiencing its longest period of decline since the first half of 2013.”
Strong appetite for risk in Europe
European equity indices opened the new trading week on a high note and then proceeded to rake in even more gains until the morning London session came to an end. Risk-taking was therefore very clearly the name of the game in Europe.
And according to market analysts, the risk-on vibes during the session was due the news over the weekend that the U.S. Senate were able to successfully approve their version of the Republican tax reform bill.
However, I would add that the risk-on vibes also likely reflected bargain/relief buying.
After all, European equity indices took hits last Friday when ABC News released a bombastic report claiming that Trump supposedly ordered Flynn to contact the Russians while Trump was still a candidate.
ABC News later issued a correction to that “news” during the weekend. However, markets were already closed by then, which is why I think we’re also seeing some bargain/relief buying today.
- The pan-European FTSEurofirst 300 was up by 1.13% to 1,524.85
- Germany’s DAX was up by 1.41% to 13,042.50
- The blue-chip Euro Stoxx 50 was up by 1.20% to 3,569.96
U.S. equity futures were also in the green, hinting that the risk-on vibes may carry over into the upcoming U.S. session.
- S&P 500 futures were up by 0.61% to 2,660.00
- Nasdaq futures were up by 0.43% to 6,373.76
Major Market Mover(s):
The pound was steady for most of the session. Heck, the pound just brushed off the U.K.’s better-than-expected construction PMI.
However, the pound later got a bullish boost near the end when Members of the European Parliament shared that Brexit negotiator Barnier said that a breakthrough in Brexit talks is possible and that the U.K. has given concessions on the Irish border issue.
GBP/USD was up by 70 pips (+0.52%) to 1.3509, GBP/JPY was up by 75 pips (+0.50%) to 152.59, GBP/CHF was up by 58 pips (+0.45%) to 1.3287
The Swissy extended its losses from the earlier session and was the worst-performing currency not just of the morning London session, but of the day (so far) as well. And that was likely due to the strong appetite for risk during the session.
USD/CHF was up by 3 pips (+0.04%) to 0.9834, AUD/CHF was up by 9 pips (+0.12%) to 0.7479, NZD/CHF was up by 9 pips (+0.13%) to 0.6747
The risk-on vibes gave all the comdolls a boost. However, the Loonie was able to outperform its peers and was the second strongest currency of the morning London session, even though oil prices slid lower.
There was no clear reason for this wonky price action, but preemptive positioning ahead of this week’s BOC statement is possible, especially after last week’s impressive Canadian jobs report.
USD/CAD was down by 26 pips (-0.20%) to1.2686, AUD/CAD was down by 10 pips (-0.11%) to 0.9642, EUR/CAD was down by 22 pips (-0.15%) to1.5040
Watch Out For:
- 3:00 pm GMT: U.S. factory orders (0.4% expected, 1.4% previously)