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Today’s morning London saw a three-way battle royal between the pound, the euro, and the Swissy, with the euro ultimately coming out on top.

Meanwhile, the yen was feeling a bit under the weather, likely because of the risk-on vibes in Europe, as well as the surge in global bond yields.

  • SECO Swiss consumer climate: 5.0 vs. 2.0 expected, -2.0 previous
  • U.K. Nationwide HPI m/m: 0.6% vs. 0.1% expected, 0.6% previous
  • Swiss retail sales y/y: 0.6% vs. 1.5% expected, -0.2% previous
  • Spanish manufacturing PMI: 55.2 vs. 55.7 expected, 55.8 previous
  • Swiss manufacturing PMI: 65.3 vs. 64.2 expected, 65.2 previous
  • Italian manufacturing PMIL 59.0 vs. 57.7 expected, 57.4 previous
  • French final manufacturing PMI: 58.4 vs. no change from 58.1 expected
  • German final manufacturing PMI: 61.1 vs. no change from 61.2 expected
  • Euro Zone final manufacturing PMI: unchanged at 59.6 as expected
  • U.K. manufacturing PMI: 55.3 vs. 56.5 expected, 56.2 previous

Major Events/Reports

U.K. manufacturing PMI

It’s a new month, which means another batch of U.K. PMI reports from Markit.

As usual, the U.K.’s manufacturing PMI report was released first. And according to the report, the U.K.’s headline manufacturing PMI reading deteriorated from 56.2 to 55.3 in January, which is contrary to expectations that the reading would improve slightly to 56.5.

According to commentary from Markit, the headline reading weakened because the rate of expansion in manufacturing output “eased to a six-month low.” Moreover, new orders growth was “the slowest in seven months.”

But on a more upbeat note, weaker domestic demand was partially offset by foreign demand since “Foreign demand improved at one of the quickest rates over the past four years.”

Export sales saw increases mainly “to clients in North America, China, mainland Europe, the Middle East and Japan.”

Another upbeat takeaway from the PMI report “was an upsurge in price pressures.”

To be more specific, “Purchase prices rose at the fastest rate in 11 months.”

More importantly (for CPI and rate hike expectations), “Part of the increase in costs was passed on to clients in the form of higher selling prices. January saw the steepest increase in output charges since April of last year.”

Risk-friendly vibes in Europe

Risk-taking was apparently the name of the game in Europe since the major European equity indices were broadly in positive territory.

And market analysts say that the risk-on vibes were being fueled by mostly positive earnings reports and expectations that global growth will accelerate.

These supposedly were able to overcome concerns that the Fed may hike further, with the ECB following suit, which will tighten financial conditions and constrain growth.

  • The pan-European FTSEurofirst 300 was up by 0.23% to 1,557.50
  • Germany’s DAX was up by 0.11% to 13,204.50
  • The blue-chip Euro Stoxx 50 was up by 0.31% to 3,617.50

Global bond yields surge

Another sign that risk-taking was the name of the game in Europe was surge in global bond yields.

However, market analysts also noted that, aside from risk-taking, bond yields were on the rise because of the Fed’s more upbeat tone on inflation, which reinforced expectations that the Fed will continue to hike this year.

And this, in turn, supposedly reinforced expectations that monetary policy in Europe will tighten soon as well.

  • German 10-year bond yield up by 4.76% to 0.726%
  • French 10-year bond yield up by 0.74% to 0.997%
  • U.K. 10-year bond yield up by 2.11 to 1.546%
  • U.S. 10-year bond yield up by 1.04% to 2.748%
  • Canadian 10-year bond yield up by 1.05% to 2.314%

Major Market Mover(s):


The euro was the best-performing currency of the morning London session, as well as the top-performing currency of the day (so far).

The Swissy, meanwhile, was in second place, likely because the risk-on vibes dampened demand for the safe-haven Swissy a bit, allowing the euro to pull ahead.

As to why the euro was on a tear, there’s no clear for that. Sure, the Euro Zone’s PMI report were net positive,  but the euro was already on the rise before the London open, so we can’t really point to the PMI reports.

But as noted earlier when I pointed out that bond yields were on the rise, market analysts partially attributed the surge in global bond yields on the Fed’s more upbeat tone on inflation, which reinforced expectations that the Fed will continue to hike this year. That then supposedly reinforced expectations that monetary policy in Europe will tighten soon as well.

If that’s really the case, then expectations that the ECB will be tightening sooner or later may have driven the euro higher along with European bond yields.

EUR/USD was up by 52 pips (+0.42%) to 1.2454, EUR/JPY was up by 57 pips (+0.42%) to 136.49, EUR/AUD was up by 78 pips (+0.50%) to 1.5559

USD/CHF was down by 19 pips (-0.20%) to 0.9317, AUD/CHF was down by 21 pips (-0.29%) to 0.7456, CAD/CHF was down by 13 pips (-0.17%) to 0.7564


The pound already caught a bid before the morning London session even rolled around. There were no apparent catalysts, but market analysts were pointing to easing political jitters and speculation that the BOE will sound more hawkish in next week’s BOE statement.

Anyhow, the pound jumped higher when the morning London session finally opened.

However, the pound’s jump was cut short and the pound began taking hits across the board when the U.K.’s manufacturing PMI report failed to impress.

The pound was able to cling on to its gains and close the morning London session on higher note, though. Well, except against the Swissy and the euro that is.

GBP/USD was up by 26 pips (+0.19%) to 1.4221, GBP/JPY was up by 29 pips (+0.19%) to 155.88, GBP/CAD was up by 25 pips (+0.15%) to 1.7516


Rising bond yields + risk-on vibes  = weak yen. Enough said!

USD/JPY was up by 7 pips (+0.07%) to 109.61, CHF/JPY was up by 23 pips (+0.20%) to 117.62, NZD/JPY was up by 14 pips (+0.17%) to 80.60

Watch Out For:

  • 1:30 pm GMT: U.S. preliminary non-farm productivity (0.7% expected, 3.0% previous) and unit labor costs (0.9% expected, -0.2% previous)
  • 1:30 pm GMT: U.S. initial jobless claims (235K expected, 233K previous)
  • 2:30 pm GMT: Markit’s Canadian manufacturing PMI (54.7 previous)
  • 2:45 pm GMT: Markit’s final U.S. manufacturing PMI (no change from 55.5 expected)
  • 3:00 pm GMT: ISM’s U.S. manufacturing PMI (58.6 expected, 59.7 previous)
  • 3:00 pm GMT: U.S. construction spending (0.4% expected, 0.8% previous)
  • 9:45 pm GMT: Building consents in New Zealand (10.8% previous)
  • 9:45 pm GMT: Visitor arrivals in New Zealand (2.5% previous)