There wasn’t much in terms of market-moving news or top-tier economic reports during the morning London session session. That’s doesn’t mean that price action was snore fest, though, since there were a few noticeable themes that played out.
First up is the pound since pound bulls apparently awakened from their slumber and pushed the pound higher against all its peers.
Meanwhile, the yen staged a broad-based recovery and almost edged out the pound, even though risk-taking was the dominant sentiment in Europe. European bond yields were down, though, and yen pairs were likely taking directional cues from those.
The Kiwi is noteworthy as well since it was the best-performing currency of the earlier Asian session but ended up at the bottom of the forex heap during course of the morning London session.
- Italian trade balance: €4.95B vs. €3.23B expected, €3.99B previous
- Euro Zone final HICP y/y: unchanged at 1.5% as expected
- Euro Zone final core HICP y/y: unchanged at 0.9% as expected
- CBI’s U.K. industrial order expectations: 17 vs. 14 expected, 17 previous
Very risk-friendly vibes in Europe
Europe is starting the new trading week on a very upbeat note it seems since the major European equity indices were well in the green during today’s morning London session.
And market analysts say that the appetite for risk was driven mainly by speculation that the U.S. tax reform bill will get passed within the week. Although some market analysts also pointed to mergers and acquisitions, as well as other deal-making activities between and among European companies for the risk-friendly environment during the session.
- The pan-European FTSEurofirst 300 was up by 0.86% to 1,541.30
- Germany’s DAX was up by 1.36% to 13,281.50
- The blue-chip Euro Stoxx 50 was up by 1.06% to 3,599.50
U.S. equity futures also got bouyed by the risk-on vibes, hinting that the risk appetite may carry over into the upcoming U.S. session.
- S&P 500 futures were up by 0.36% to 2,691.62
- Nasdaq futures were up by 0.55% to 6,534.13
European bond yields fall
Despite signs of risk-taking in the European equities and U.S. equity futures markets, European bonds were in high demand, causing bond yields to fall pretty much across the board.
Market analysts do note, however, that demand for European bonds was probably not driven by safe-haven flows. Rather, demand for European bonds was driven by optimism after last week’s news that Fitch upgraded Portugal’s credit rating to BBB (investment grade) with a stable outlook.
- German 10-year bond yield down by 1.32% to 0.300%
- French 10-year bond yield down by 0.95% to 0.628%
- U.K. 10-year bond yield down by 0.43% to 1.147%
- Spanish 10-year bond yield down by 1.09% to 1.446%
- Italian 10-year bond yield down by 0.94% to 1.795%
Commodities staged a broad-based rally during the morning London session, likely because of the Greenback’s recent dip. After all, a weaker U.S. dollar means that commodities (that are priced in US$) become relatively cheaper and more attractive to buy. And for reference, the U.S. dollar index was down by 0.26% to 93.22 for the day when the session came to an end.
Precious metals raked in gains, even though risk-taking prevailed.
- Gold was up by 0.37% to $1,260.70 per troy ounce
- Silver was up by 0.57% to $16.155 per troy ounce
Oil benchmarks also did well enough.
- U.S. WTI crude oil was up by 0.40% to $57.56 per barrel
- Brent crude oil was up by 0.38% to $63.47 per barrel
Base metals were mixed, but the majority were in positive territory.
- Nickel was up by 0.19% to $11,590.00 per pound
- Tin was up by 0.33% to $19,230.00 per dry metric ton
Major Market Mover(s):
The pound outpaced all its peers and was the best-performing currency of the morning London session, even though there were no apparent catalysts. Although some market analysts claimed that hedge funds were supposedly loading up on the pound.
GBP/USD was up by 21 pips (+0.16%) to 1.3371, GBP/AUD was up by 42 pips (+0.24%) to 1.7449, GBP/NZD was up by 95 pips (+0.50%) to 1.9091
After getting whupped during the earlier Asian session, the yen was able to stage a broad-based recovery during the morning London session, despite the prevalence of risk aversion.
There weren’t any apparent catalysts for the yen’s recovery but European bond yields slumped broadly. And it’s very likely that the yen was taking directional cues from those.
USD/JPY was down by 15 pips (-0.14%) to 112.51, CAD/JPY was down by 28 pips (-0.32%) to 87.38, AUD/JPY was down by 18 pips (-0.22%) to 86.21
The Kiwi was in pole position at the start of the trading week. However, the Kiwi lost the lead and even ended up at the very bottom of the forex heap during the course of the morning London session.
There’s no apparent reason for this wonky price action, especially since risk-taking was the dominant sentiment and commodities were on the rise.
It’s therefore probable that we’re seeing some profit-taking, especially after last week’s Kiwi surge.
NZD/USD was down by 23 pips (-0.34%) to 0.7003, NZD/CHF was down by 32 pips (-0.46%) to 0.6918, NZD/JPY was down by 37 pips (-0.47%) to 78.80
Watch Out For:
- 1:30 pm GMT: Foreign securities purchases in Canada ($16.81B previous)
- 3:00 pm GMT: NAHB’s U.S. housing market index (steady at 70.0 expected)
- 9:00 pm GMT: Westpac’s New Zealand consumer sentiment (112.4 previous)