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The forex calendar for today’s morning London session was rather barren. Even so, there was action to be had since the euro caught a bid and closed broadly higher.

Meanwhile, the pound got a good pounding ahead of the Euro Summit and then got swamped by another wave of sellers when word got out that Brexit talks were cleared for Phase 2.

  • Euro Zone trade balance: €19.0B vs. €24.3B expected, €24.5 previous
  • Euro Summit: Brexit talks to advance to Phase 2

Major Events/Reports

Brexit-related updates

European Council President Donald Tusk broke the news (via a tweet) that E.U. leaders judged that sufficient progress on Brexit has already been made during the Euro Summit earlier. This opens the door to Phase 2 of Brexit talks, which refers to the transition period and the post-Brexit trade deal.

Of course, British Prime Minister Theresa May replied later (also via a tweet).

Commodities climb

Commodities were broadly higher during the morning London session, likely because of the Greenback’s recent weakness, which makes globally-traded commodities (that are priced in U.S. dollars) relatively cheaper to buy.

And for reference the U.S. dollar index was down by 0.11% to 93.54 for the day when the session came to an end.

Precious metals were well supported.

  • Gold was up by 0.29% to $1,260.70 per troy ounce
  • Silver was up by 0.57% to $16.025 per troy ounce

Oil benchmarks also did well enough.

  • U.S. WTI crude oil was up by 0.60% to $57.38 per barrel
  • Brent crude oil was up by 0.27% to $63.48 per barrel

Base metals were actually mixed, but most were in positive territory.

  • Copper was up by 0.19% to $3.078 per pound
  • Lead was up by 0.38% to $2,498.00 per dry metric ton

Risk aversion prevails in Europe

Risk aversion as apparently the more dominant sentiment during the morning London session since the major European equity indices were mostly printing losses.

And according to market analysts, the prevalence of risk aversion was due to disappointing reports for H&M and Ferragamo, which weighed on the shares of other fashion companies and soured overall risk sentiment.

Also, European banks are still reeling in pain after the ECB and BOE gave their cautious forward guidance, which weakened hopes for tigher monetary policy.

  • The pan-European FTSEurofirst 300 was down by 0.36% to 1,525.59
  • Germany’s DAX was down by 0.17% to 13,046.00
  • The blue-chip Euro Stoxx 50 was down by 0.36% to 3,549.50

Major Market Mover(s):

GBP

The pound had a really bad run during the morning London session since it encountered sellers right from the get-go and ahead of the Euro Summit.

And when Tusk announced later that Brexit talks were cleared to proceed to Phase 2, the pound found even more sellers instead of jumping higher on the good news, which heavily implies that forex traders who have been betting (for months) that Brexit talks will progress were using the actual event to take some profits off the table.

Basically, a “buy the rumor, sell the news” scenario probably played out. That’s also an opinion that other market analysts expressed.

GBP/USD was down by 65 pips (-0.49%) to 1.3370, GBP/NZD was down by 97 pips (-0.51%) to 1.9030, GBP/CHF was down by 54 pips (-0.41%) to 1.3221

EUR

The euro was the best-performing currency of the morning London session. There were no apparent catalysts for the euro’s strength but short covering by euro bears who rode the euro’s broad-based downswing in the wake of the ECB presser is one likely reason.

EUR/USD was up by 18 pips (+0.16%) to 1.1801, EUR/CHF was up by 22 pips (+0.20%) to 1.1670, EUR/GBP was up by 56 pips (+0.65%) to 0.8827

Watch Out For:

  • 1:30 pm GMT: Canadian manufacturing sales (0.9% expected, 0.5% previous)
  • 1:30 pm GMT: Empire State manufacturing index (18.8 expected, 19.4 previous)
  • 2:15 pm GMT: U.S. capacity utilization rate (77.2% expected, 77.0% previous)
  • 2:15 pm GMT: U.S. industrial production (0.3% expected, 0.9% previous)