All was quiet in the forex front during the morning London session, likely because forex traders were hunkering down for the NFP report.
The session wasn’t a complete snooze fest, though, since GBP returned some of its gains from earlier and ended the session on a lower note.
NZD, meanwhile, likely got a small boost from the risk-on vibes since the higher-yielding NZD was nudged higher across the board.
- German trade balance: €19.9B vs. €22.0B expected, €21.9B previous
- French industrial production m/m: 1.9% vs. -0.1% expectred, 0.8% previous
- U.K. industrial production m/m: 0.0% as expected, 0.7% previous
- U.K. manufacturing production m/m: 0.1% vs. 0.0% expected, 0.7% previous
- Construction output in the U.K. m/m: -1.7% vs. 0.1% expected, -1.6% previous
- U.K. good trade balance: -£10.8b vs. -£11.5B expected, -£10.5B previous
- U.S. NFP report coming up; read Forex Gump’s Event Preview
Today is another U.S. non-farm payrolls (NFP) Friday! And normally, volatility and directional movement tend to be relatively limited in the run-up to the NFP report as forex traders brace themselves for the top-tier event.
Well, today was certainly a normal day since trading conditions were a bit tight. By the way, you may want to read up on Forex Gump’s Event Preview, if you’re interested on what happened last time and what’s expected this time around.
E.U.’s Barnier speaks
Michel Barnier, the E.U.’s chief Brexit negotiator, gave a speech earlier at a press conference detailing what transpired during this week’s talks with the U.K. government.
And while Barnier said a lot of positive things, he also gave a reality check of sorts when he said the following (emphasis mine):
“Let me be clear: there is still work to be done and negotiations on a number of issues, such as the governance of our agreement and Euratom. There are more hurdles to take. We will need to have the final version of the Withdrawal Agreement ready by October 2018. Less than one year.”
He also stressed that the progress made this week is just one stage when he said the following:
“It is now up to the European Council to decide whether this constitutes sufficient progress, and to move the talks to the next stage.”
Barnier, of course, is referring here to next week’s E.U. Summit wherein the leaders of the other E.U. Member States get to say their piece.
Commodities rise further but precious slide lower
Commodities had a repeat performance of yesterday’s price action in that precious metals took more hits as most other commodities climbed even higher.
Once again, Greenback strength was cited by market analysts as the reason for the slide in precious metals, gold in particular. Although risk-taking was also the dominant sentiment. And that may have dampened safe-haven demand for precious metals.
By the way, the Greenback was actually mixed for the session. But the U.S. dollar index was still up by 0.27% to 94.00 for the day when the session ended.
Anyhow, Greenback strength didn’t dissuade market players from loading up on the other currencies, though.
And according to market analysts, demand for some base metals was sustained by encouraging import data from China.
The rise in oil prices, meanwhile, was attributed by market analysts to higher import data from China, as well as potential oil supply problems because of troubles in Nigeria.
Oil benchmarks clawed their way even higher.
- U.S. WTI crude oil was up by 1.57% to $57.58 per barrel
- Brent crude oil was up by 1.48% to $63.12 per barrel
The same can be said of most base metals.
- Copper was up by 0.46% to $2.978 per pound
- Nickel was up by 0.30% to $11,035.00 per dry metric ton
Precious metals had another bad run, however.
- Gold was down by 0.40% to $1,247.80 per troy ounce
- Silver was down by 0.04% to $15.795 per troy ounce
Risk-taking in Europe ahead of NFP report
Risk-taking was clearly the name of the game in Europea since practically all of the major European equity indices were raking in respectable gains.
And according to market analysts, the source of all the optimism in Europe was the breakthrough in Brexit talks.
Do note, however, this was before the NFP report, so sentiment may still turn sour (or improve even further) later, depending on how the NFP report turns out.
- The pan-European FTSEurofirst 300 was up by 0.79% to 1,532.20
- Germany’s DAX was still up by 1.23% to 13,205.75
- The blue-chip Euro Stoxx 50 was up by 0.86% to 3,604.50
U.S. equity futures also got a lift from the risk-on vibes. Although that could change later, depending on the NFP report.
- S&P 500 futures were down by 0.21% to 2,645.00
- Nasdaq futures were down by 0.51% to 6,355.26
Major Market Mover(s):
The pound shed its earlier gains almost right from the get-go and was arguably the only real mover during the morning London session.
The pound’s weakness was likely due to profit-taking by pound bulls who were expecting a breakthrough in Brexit talks and in order to avoid weekend risk ahead of next week’s E.U. Summit.
However, it’s also possible that we’re also seeing genuine sellers after Barnier gave a reality check in his debriefing on this week’s Brexit negotiations.
GBP/USD was down by 69 pips (-0.46%) to 152.40, GBP/CAD was down by 88 pips (-0.51%) to 1.7249, GBP/JPY was down by 68 pips (-0.45%) to 152.41
Trading conditions were a bit tight during today’s morning London session. However, the Kiwi likely got a small boost from the risk-on vibes since it was able to edge out both the Loonie and the Aussie to come out as the best-performing currency of the morning London session.
The Kiwi had the most trouble against the Loonie, likely because oil prices were in rally mode during the session. The Kiwi didn’t have as hard a time against the Aussie though, very likely because gold prices continued to fall, dampening demand for the Aussie a bit.
NZD/USD was up by 6 pips (+0.09%) to 0.6842, NZD/JPY was up by 9 pips (+0.12%) to 77.65, NZD/CHF was up by 6 pips (+0.10%) to 0.6819
Watch Out For:
- 1:15 pm GMT: Housing starts in Canada (214K expected, 223K previous)
- 1:30 pm GMT: U.S. non-farm payrolls (+195K expected, +261K previous), jobless rate (steady at 4.1% expected), and average hourly earnings (0.3% expected, 0.0% previous); read Forex Gump’s Event Preview on the NFP report
- 1:30 pm GMT: Canada’s capacity utilization rate (84.8% expected, 85.0% previous)
- 3:00 pm GMT: University of Michigan’s consumer sentiment index (99.0 expected, 98.5 previous)
- 3:00 pm GMT: U.S. final wholesale inventories (-0.4% expected, same as previous)