The forex calendar for today’s morning London session was pretty barren, but there was enough action to keep the session interesting, with the yen outpacing the Swissy to come out on top while the Loonie and the pound raced to the bottom of the forex heap.

  • French BOF business sentiment: unchanged at 106.0 vs. 107.0 expected
  • Chinese new yuan loans: 1,120B vs. 800B expected, 663B previous
  • Italian retail sales m/m: -1.0% vs. -0.1% expected, 0.8% previous

Major Events/Reports

Explosion in New York City

An explosion In New York City was reported late into the session.

No details at the moment, but the New York City police and fire departments have ordered the evacuation of some subway lines.

Commodities climb but oil slides

Most commodities resumed last week’s theme by climbing even higher during today’s morning London session.

I say “most” commodities because oil did not join the bullish party. In fact, oil was going in the opposite direction.

The commodities rally was likely sustained by the Greenback’s weakness for the day since the U.S. dollar index was down by 0.08% to 93.77 for the day when the session came to an end. Although it’s worth mentioning that the Greenback was actually mixed for the morning London session itself.

As for the slide in oil prices, market analysts blamed that on another reported rise in the number of U.S. oil rigs, which points to higher U.S. oil output that threatens to offset OPEC’s extended oil cut deal.

Base metals were mixed, but most were doing okay.

  • Copper was up by 0.12% to $2.982 per pound
  • Lead was up by 0.47% to $2,465.25 per dry metric ton

Precious metals were also in positive territory

  • Gold was up by 0.26% to $1,251.70 per troy ounce
  • Silver was up by 0.30% to $15.870 per troy ounce

As mentioned earlier, oil benchmarks didn’t too well.

  • U.S. WTI crude oil was down by 0.23% to $57.23 per barrel
  • Brent crude oil was down by 0.03% to $63.38 per barrel

Fading appetite for risk in Europe

The major European equity indices started the new trading week on a high note and then proceeded to climb even higher. However, the bullish push soon encountered resistance, forcing the major European equity indices to give back their gains, with some already in negative territory by the end of the morning London session.

Market analysts say that the risk-on vibes from earlier were due to optimism ahead of the Fed’s expected rate hike this week, which boosted banking shares. After all, banks benefit directly from higher interest rates.

As for the returning risk-off vibes, there’s no clear reason for that yet.

Reports of an explosion in New York caused the major European equity indices to surrender even more gains. However, they were already in retreat long before that.

Market analysts did note earlier that tech shares continued to slide while communications, utilities, and other capital-intensive companies were also under pressure, with the Fed’s expected rate hike being cited as the reason.

Basically, higher interest rates means higher borrowing costs, which is not a very friendly environment for capital-intensive companies. And perhaps they overwhelmed the risk-on vibes brought about by the strong performance of banking shares.

  • The pan-European FTSEurofirst 300 was still up by 0.03% to 1,531.85 but off the day’s high at 1,535.36
  • Germany’s DAX was still up by 0.06% to 13,162.25 but off the day’s high at 13,191.50
  • The blue-chip Euro Stoxx 50 was already down by 0.17% to 3,589.50

Global bond yields fall

Another hint that risk appetite was fading and risk aversion was making a comeback was the strong demand for bonds which sent global bonds yields lower.

  • German 10-year bond yield down by 7.74% to 0.286%
  • French 10-year bond yield down by 1.14% to 0.622%
  • U.K. 10-year bond yield down by 5.24% to 1.212%
  • U.S. 10-year bond yield down by 1.04% to 2.358%
  • Canadian 10-year bond yield down by 0.75% to 1.847%

Major Market Mover(s):

JPY

Falling bond yields and signs that appetite for risk was fading apparently gave the safe-haven yen a double boost since the yen was the best-performing currency of the morning London session.

USD/JPY was down by 15 pips (-0.13%) to 113.28, CAD/JPY was down by 19 pips (-0.22%) to 88.15, AUD/JPY was down by 7 pips (-0.08%) to 85.27

GBP

The pound was the weakest currency of the morning London session and the pound’s slide started from the get-go, even though there were no apparent negative catalysts.

Perhaps we’re seeing an extension of last Friday’s profit-taking ahead of this week’s BOE statement and the E.U. Summit on Brexit talks?

GBP/USD was down by 20 pips (-0.15%) to 1.3366, GBP/JPY was down by 43 pips (-0.29%) to 152.42, GBP/CHF was down by 40 pips (-0.30%) to 1.3233

CAD

The Loonie was the second worst-performing currency after the pound. Other than the slide in oil prices, there were no apparent catalysts for the the Loonie’s weakness, so the Loonie was probably taking directional cues from oil.

USD/CAD was up by 10 pips (+0.08%) to 1.2850, AUD/CAD was up by 13 pips (+0.14%) to 0.9672, EUR/CAD was up by 26 pips (+0.17%) to 1.5155

Watch Out For:

  • 3:00 pm GMT: U.S. JOLTS job openings (6.03M expected, 6.09M previous)