However, the euro shed a large chunk of its gains against the yen during the morning London session, apparently because of the risk-off vibes in Europe. In fact, the yen clearly dominated all its peers during the session. Although the Swissy, a fellow safe-haven, was able to put up a decent fight.
The comdolls, meanwhile, surrendered their gains from the earlier Asian session, with the Aussie getting the worst of it, even though gold reached new intraday highs during the morning London session.
- Spanish manufacturing PMI: 55.8 vs. 56.4 expected, 56.1 previous
- Italian manufacturing PMI: 57.4 vs. 58.6 expected, 58.3 previous
- French final manufacturing PMI: 58.8 vs. no change 59.3 expected
- German final manufacturing PMI: unchanged at 63.3 as expected
- Euro Zone final manufacturing PMI: unchanged at 60.6 as expected
- U.K. manufacturing PMI: 56.3 vs. 57.7 expected, 58.2 previous
- Dairy auction underway
U.K. manufacturing PMI
New year, new month, new batch of U.K. PMI reports from Markit.
And first on the lineup is the U.K.’s December manufacturing PMI report, which revealed that the U.K.’s headline manufacturing PMI reading slumped from 58.2 to 56.3. This is a much sharper drop compared to expectations that the reading would only slide to 57.7.
However, the pound didn’t seem too bothered by the PMI report and had a mixed performance during the session, likely because commentary from Markit was somewhat positive.
To be more specific, Markit noted that even though the rates of expansion in output, new orders and employment during the December period were slower compared to November, they still “remained solid and well above long-run trends.”
Moreover, the slowdown in output growth was due to weaker demand for consumer goods, which is within expectations since wage growth in the U.K. has been taking hits because of strong inflation.
But on a more upbeat note, Markit highlighted that “Output growth accelerated in the intermediate and investment goods sectors.” In fact, “The strongest pace of expansion overall was registered in the intermediate goods category,” which is a good sign for British industries and likely a sign that business investments are picking up after slowing in the wake of the Brexit referendum.
And while domestic demand weakened, U.K. manufacturers reported “a solid increase in new export sales” as “Demand improved from clients in Europe, the USA, China and the Middle East.”
Oil falls, other commodities mixed
Oil benchmarks took hits during the morning London session and are currently down for the day after printing gains earlier.
The earlier rise in oil prices was attributed to the ongoing unrest in Iran. As for the slide during the morning London session, there’s no clear catalyst for that yet, but the most likely catalyst is a Reuters report citing unnamed sources as saying that the unrest in Iran has no impact in oil production.
- U.S. WTI crude oil was down by 0.13% to $60.34 per barrel
- Brent crude oil was up by 0.25% to $66.70 per barrel
Risk-off start in Europe
Europe is apparently starting the new trading year on a downbeat note since the major European equity indices opened lower and then proceeded to plumb new intraday lows during the course of the morning London session.
And market analysts say that the risk-off vibes in Europe were due to news that vehicles sales in France dropped, which caused auto stocks to sell off. These same market analysts also pointed to the slide in copper prices since that’s supposedly why mining shares were also in decline today, even though most other base metals were in the green.
Other than that, it’s also possible that investors are coming to grips with the reality that the ECB’s tapered QE extension has come into effect since that will likely cause long-term borrowing costs in the Euro Zone to rise over time.
- The pan-European FTSEurofirst 300 was down by 0.42% to 1,523.13
- Germany’s DAX was down by 0.71% to 12,825.50
- The blue-chip Euro Stoxx 50 was down by 0.64% to 3,481.50
Major Market Mover(s):
The yen won out against the Swissy and emerged as the best-performing currency of the morning London session.
Even the mighty euro, which has been moving higher because of hawkish ECB rhetoric over the weekend, was forced to bend the knee to the yen. In fact, the yen is now the second strongest currency of the day and if the euro continues to weaken against the yen, then the yen may even take the top spot.
USD/JPY was down by 46 pips (-0.41%) to 112.16, GBP/JPY was down by 33 pips (-0.22%) to 152.11, EUR/JPY was down by 26 pips (-0.19%) to 135.30
All the comdolls (AUD, NZD, CAD) surrendered their gains during the course of the morning London session, with the Aussie getting the worst of it.
The higher-yielding Aussie and Kiwi were likely hurt by the risk-off vibes, with the Aussie getting an extra whupping because of the disappointing drop in the RBA’s Index of Commodity Prices from earlier.
The Loonie, meanwhile, likely got pulled lower by the slide in oil prices during the session.
AUD/USD was down by 10 pips (-0.13%) to 0.7827, AUD/JPY was down by 45 pips (-0.51%) to 87.79, AUD/CHF was down by 23 pips (-0.31%) to 0.7601
NZD/USD was down by 8 pips (-0.11%) to 0.7115, NZD/JPY was down by 38 pips (-0.48%) to 79.81, NZD/CHF was down by 20 pips (-0.29%) to 0.6910
USD/CAD was up by 14 pips (+0.12%) to 1.2540, EUR/CAD was up by 51 pips (+0.34%) to 1.5126, GBP/CAD was up by 54 pips (+0.32%) to 1.7006
Watch Out For:
- 2:30 pm GMT: Canada’s manufacturing PMI (54.4 previous)
- 2:45 pm GMT: Markit’s final U.S. manufacturing PMI (no change from 55.0 expected)
- Dairy auction currently underway (-3.9% previous); auction usually ends at around 2:00 pm GMT