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Trading conditions were tight during the morning London session as forex traders hunkered down for the NFP report. The session wasn’t totally devoid of action, however, since the Kiwi got nudged higher while the yen dipped a bit, likely because of the risk-on vibes ahead of the NFP report.

  • German retail sales m/m: 2.3% vs. 1.0% expected, -1.2% previous
  • Euro Zone retail PMI: 53.0 vs. 52.4 previous
  • French preliminary HICP y/y: 1.3% as expected vs. 1.2% previous
  • Euro Zone flash HICP y/y: 1.4% as expected vs. 1.5% previous=
  • Euro Zone flash core HICP y/y: 0.9% vs. 1.0% expected, 0.9% previous
  • U.S. NFP report and Canada’s jobs report coming up
  • U.S. and Canadian trade reports also coming up

Major Events/Reports

NFP Friday!

Today is another U.S. non-farm payrolls (NFP) Friday! Volatility and directional movement normally get sapped ahead of top-tier events like the U.S. non-farm payrolls reports, which makes today a very normal day since most currency pairs were trapped in tight ranges.

By the way, if you want to trade this top-tier report, then you may want to read up on Forex Gump’s Event Preview for the NFP Report.

And while you’re at it, you may want to check out Forex Gump’s Event Preview on the Canadian Jobs Report as well since the two labor market reports will be released simultaneously.

Euro Zone HICP

The headline flash estimate for the Euro Zone’s December HICP came in at 1.4% year-on-year. This is within expectations, but is a slowdown from November’s 1.5% reading.

Moro ever, the 1.4% reading is a tick slower compared to the ECB’s forecast of +1.5%, as laid out in the December Eurosystem Staff Macroeconomic Projections.

But on a more upbeat note, HICP less energy, one of the ECB’s preferred measures for core inflation, came in at 1.2% year-on-year, which is in-line with the ECB’s own forecasts.

Meanwhile, HICP less energy and unprocessed food, another of the ECB’s preferred measures for core inflation, printed a 1.1% rise which is a tick faster than the ECB’s projected 1.0% annual increase.

Overall, the Euro Zone’s flash HICP report was mixed but with positive undertones for underlying inflation, which is probably why the euro barely reacted to the report.

Commodities fall

Almost all commodities took hits across the board during the morning London session, with oil benchmarks getting hit the hardest.

The broad-based fall in commodities was likely due to the Greenback’s recent recovery since a stronger Greenback means that globally-traded commodities become relatively more expensive to buy.

And for reference, the U.S. dollar index was up by 0.20% to 91.77 for the day when the session ended. Although it should be noted that the Greenback’s actual performance was mixed during the session itself.

As for oil’s extra weakness, profit-taking after a good run this week is a possibility. Although some market analysts also pointed to the usual suspect: signs of higher U.S. oil output.

Precious metals were in pain.

  • Gold was down by 0.32% to $1,317.40 per troy ounce
  • Silver was down by 0.43% to $17.195 per troy ounce

Base metals were actually mixed, but most were leaking red.

  • Copper was down by 0.58% to $3.244 per pound
  • Nickel was down by 0.51% to $12,577.50 per dry metric ton

Oil benchmarks fared really poorly.

  • U.S. WTI crude oil was down by 1.02% to $61.38 per barrel
  • Brent crude oil was down by 1.00% to $67.39 per barrel

Some risk-taking ahead of the NFP report

The European equities market usually gets skittish ahead of top-tier reports like the NFP report.

However, that wasn’t the case during today’s morning London session. In fact, the major European equity indices were raking in respectable gains during the course of the session.

And according to market analysts, the risk-friendly environment in Europe was due to optimism on the Euro Zone economy, especially after yesterday’s services PMI readings, as well as risk sentiment spillover from the earlier sessions.

  • The pan-European FTSEurofirst 300 was up by 0.64% to 1,558.22
  • Germany’s DAX was up by 1.15% to 13,319.00
  • The blue-chip Euro Stoxx 50 was up by 0.95% to 3,602.50

The risk-on vibes also helped U.S. equity futures rake in gains as well. Although that may change, depending on how the NFP report turns out later.

  • S&P 500 futures were up by 0.28% to 2,731.50
  • Nasdaq futures were up by 0.37% to 6,628.25

Major Market Mover(s):

NZD

The higher-yielding Kiwi was nudged higher across the board during the morning London session. There were no apparent catalysts and commodities were bleeding out, so the higher-yielding Kiwi likely got a boost from the risk-on vibes.

NZD/USD was up by 4 pips (+0.06%) to 0.7156, NZD/JPY was up by 12 pips (+0.14%) to 81.03, NZD/CAD was up by 5 pips (+0.05%) to 0.8950

JPY

The risk-friendly environment may have been good for the Kiwi, but it terrible for the safe-haven yen, so much so that the yen dipped lower across the board and was the worst-performing currency of the morning London session.

USD/JPY was up by 9 pips (+0.08%) to 113.24, CHF/JPY was up by 10 pips (+0.08%) to 115.99, GBP/JPY was up by 20 pips (+0.13%) to 153.49

Watch Out For:

  • 1:30 pm GMT: U.S. non-farm employment change (+190K vs. +228K), jobless rate (steady at 4.1% expected), and average hourly earnings (0.3% expected vs. 0.2% previous)
  • 1:30 pm GMT: Canada’s net employment change (2.0k expected, 79.5K previous) and jobless rate (6.0% expected, 5.9% previous)
  • 1:30 pm GMT: U.S. trade balance (-$49.9B expected, -$48.7B previous)
  • 1:30 pm GMT: Canada’s trade balance (-$1.13B expected, -$1.47B previous)
  • 3:00 pm GMT: ISM’s U.S. non-manufacturing PMI (57.6 expected, 57.4 previous)
  • 3:00 pm GMT: Ivey Canadian PMI (62.2 expected, 63.0 previous)
  • 3:00 pm GMT: U.S. factory orders (1.1% expected, -0.1% previous)
  • 5:30 pm GMT: Cleveland Fed President Loretta Mester will speak