The Greenback outpaced its peers during the morning London session, supposedly because the equities sell-off boosted demand for the Greenback. The pound, meanwhile, resumed its broad-based slide after recovering earlier.
- German factory orders m/m: 3.8% vs. 0.7% expected, -0.4% previous
- German factory orders y/y: 7.2% vs. 3.1% expected, 8.7% previous
- French gov’t budget balance: -€67.8B vs. -€84.7B previous
- Euro Zone retail PMI: 50.8 vs. 53.0 previous
BOJ Shogun Kuroda speaks
BOJ Shogun Haruhiko Kuroda had some press time shortly before the morning London session rolled around.
And while Kuroda praised the Japanese economy and even presented an optimistic outlook, he also repeated his usual piece that:
“Japanese inflation hasn’t even reached 1 percent. As such, it’s inappropriate to prematurely shift monetary policy just to create future policy space.”
He also reaffirmed the BOJ’s commitment to keep the yield of 10-year Japanese government bonds (JGB) around 0% while also saying that:
“It’s inappropriate to raise our 10-year government bond yield target now, even by a small margin.”
In other words, the BOJ is resolved to maintain its super loose monetary policy, even as other major central banks tighten.
Updates on German coalition talks
The ongoing negotiations between German Chancellor Angela Merkel’s CDU/CSU and the center-left SPD have been pushed into the background lately.
With that said, the talks are expected to end by today or early Wednesday.
And earlier, Merkel said that:
“Each of us will have to make painful compromises and I am ready for that.”
Carsten Schneider, an SPD negotiator, later said that:
“I think we have 90-95 percent, but the remaining five percent is still important.”
“It’s not going to be a masterpiece but it will do for the next 3-1/2 years.”
Risk aversion intensifies in Europe
The feelings of doom and gloom is apparently here to stay for another in Europe since the major European equity indices printed another round of painful losses.
As has been the case since last week, market analysts blamed the intense risk-off vibes on profit-taking due to speculation that the major central banks would be tightening policy sooner or later.
And expectations that the major central banks will be tightening policy, in turn, were blamed on higher bond yields amid higher inflation expectations after last week’s FOMC statement and strong NFP report.
- The pan-European FTSEurofirst 300 was down by 2.08% to 1,468.99
- Germany’s DAX was down by 2.07% to 12,425.50
- The blue-chip Euro Stoxx 50 was down by 2.29% to 3,399.50
U.S. equity futures were reeling in pain, so the risk-off vibes will likely carry over into the U.S. session.
- S&P 500 futures were down by 0.41% to 2,597.00
- Nasdaq futures were down by 0.35% to 6,406.75
Major Market Mover(s):
The Greenback was the one currency to rule them all during today’s morning London session.
There weren’t really any news reports or other catalysts, but some market analysts say that the sell-off in global equities has boosted demand for the Greenback.
In other words, these market analysts are saying that Greenback is acting as a safe-haven currency.
USD/JPY was up by 25 pips (+0.23%) to 109.27, USD/CHF was up by 52 pips (+0.56%) to 0.9378, USD/CAD was up by 25 pips (+0.21%) to 1.2554
The pound staged a broad-based recovery during the Asian session. However, sellers returned during the morning London session, forcing the pound to resume yesterday’s broad-based slide.
The pound was actually steady for the most part, before getting swamped by sellers across the board just as the morning London session was about to end. The catalyst for the pound’s slide is not yet clear at this point, however.
GBP/USD was down by 96 pips (-0.69%) to 1.3864, GBP/CAD was down by 82 pips (-0.47%) to 1.7409, GBP/NZD was down by 78 pips (-0.41%) to 1.9037
Watch Out For:
- 1:30 pm GMT: Canadian merchandise trade (-$2.25B expected, -$2.54B previous)
- 1:30 pm GMT: U.S. trade balance (-$52.0B expected, -%50.5B previous)
- 3:00 pm GMT: Canada’s Ivey PMI (60.7 expected, 60.4 previous)
- 3:00 pm GMT: U.S. JOLTS job openings (5.95M expected, 5.88M previous)
- 9:45 pm GMT: New Zealand’s quarterly employment change (0.4% expected, 2.2% previous), jobless rate (4.7% expected, 4.6% previous), and labor cost index (0.5% expected, 0.7% previous)
- Dairy auction currently underway (4.9% previous); auction usually ends at around 2:00 pm GMT