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Trading conditions were still relatively tight during the morning London session, likely because traders were (and still are) sitting on their hands ahead of the vote on the U.S. tax reform bill sometime later today.

The session wasn’t devoid of activity, though, since the euro found late buyers that allowed it to extend its gains from the earlier Asian session. The pound, meanwhile, got slapped broadly lower and was the worst-performing currency of the session.

  • German IFO business expectations: 109.5 vs. 110.7 expected, 111.0 previous
  • German IFO current assessment: 125.4 vs. 124.7 expected, 124.5 previous
  • German IFO business climate: 117.2 v.s steady at 117.6 expected
  • CBI’s U.K. industrial order expectations: 17 vs. 14 expected, 17 previous
  • Dairy auction currently underway
  • U.S. housing data coming up
  • New Zealand’s trade report later
  • Vote on the U.S. tax reform bill also later

Major Events/Reports

ECB Members speak

Two members of the ECB’s Governing Council received some air time earlier.

First up was Ardo Hansson and he said that:

“The fact that the growth is so strong gives us a lot confidence that (price) pressure will build up over time.”

That’s rather hawkish and somewhat contradicts ECB Overlord Draghi’s mantra that the ECB’s is not yet convinced that there’s a sustainable build-up in inflationary pressure in the Euro Zone.

And to drive home his hawkish message, Hansson also said the following (emphasis mine):

“Moving to a communication which draws attention to the multi-faceted elements of monetary policy including interest rates is probably something that we should consider over the coming months.”

The other ECB member who got some press time was Jozef Makuch. And Makuch’s message appears to be pretty similar to that of Hansson’s in that Makuch said that the ECB has supposedly began shifting its focus away from its QE program to interest rates, adding that “a signal on future interest rate-setting could not be ruled out,” as Reuters put it.

Signs of risk aversion in Europe

The major European equity indices initially tried to extend the risk-on party by opening mostly higher and then climbing even higher still.

However, it soon became apparent that risk aversion was making a comeback since the major European equity indices began to slink into the red one after another.

As usual, market analysts attributed the risk-on vibes earlier on speculation that the GOP tax reform bill will successfully pass through the U.S. Congress.

As for the returning risk-off vibes, there’s no clear reason for that. However, profit-taking ahead of vote on the tax reform bill later today (or early Wednesday GMT) is a possibility.

  • The pan-European FTSEurofirst 300 was already down by 0.05% to 1,545.48
  • Germany’s DAX was already down by 0.06% to 13,304.00
  • The blue-chip Euro Stoxx 50 was already down by 0.10% to 3,607.50

Major Market Mover(s):


The euro had a mixed start after climbing broadly higher during the earlier Asian session.

However, it soon became clear that the euro was getting fresh buyers when Hansson delivered his hawkish message. Although the euro didn’t really start busting the moves until Makuch gave his statement late into the session, apparently because Makuch’s comments corroborated Hansson’s earlier hawkish comments.

Anyhow, the bullish boost near the end allowed the euro to end up as the best-performing currency, not just of the morning London session, but of the day (so far) as well.

EUR/USD was up by 23 pips (+0.19%) to 1.1828, EUR/GBP was up by 36 pips (+0.42%) to 0.8848, EUR/JPY was up by 41 pips (+0.31%) to 133.24


The pound encountered sellers during the course of the morning London session and ended up as the worst-performing currency.

There weren’t really any economic reports or market-moving news, but some market analysts say that the pound’s slide was due supposedly to caution ahead of the next round of Brexit talks.

GBP/USD was down by 30 pips (-0.22%) to 1.3367, GBP/JPY was down by 16 pips (-0.11%) to 150.56, GBP/AUD was down by 54 pips (-0.31%) to 1.7410

Watch Out For:

  • 1:30 pm GMT: U.S. building permits (1,270K expected, 1,297K previous) and housing starts (1,248K expected, 1,290K previous)
  • 1:30 pm GMT: U.S. current account (-116.0B expected, -123.1B previous)
  • 3:30 pm GMT: CB’s Australian leading index (0.2% previous)
  • 9:45 pm GMT: New Zealand’s current account (-$4.22B expected, -$0.62B previous)
  • 9:45 pm GMT: New Zealand’s trade balance (-$495M expected, -$871M previous)
  • Dairy auction currently underway (+0.4% previous); auction usually ends at around 2:00 pm GMT