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The yen was the best-performing  currency of the morning London session  even though risk appetite returned. Global bond yields were down, though, and those may have given the yen a boost.

The pound, meanwhile, was pummeled by sellers, even though there weren’t really any apparent catalysts.

  • Germany’s preliminary GDP q/q: 0.6% as expected, 0.8% previous
  • German final HICP m/m: unchanged at -1.0% as expected
  • German final HICP y/y: unchanged at 1.4% as expected
  • Italy’s preliminary GDP q/q: 0.3% vs. 0.4% expected, 0.4% previous
  • The Euro Zone flash GDP q/q: unchanged at 0.6% as expected
  • The Euro Zone flash GDP y/y: unchanged at 2.7% as expected
  • Euro Zone industrial production m/m: 0.4% vs. 0.1% expected, 1.3% previous
  • Euro Zone industrial production y/y: 5.2% vs. 4.2% expected, 3.7% previous
  • U.S. CPI and retail sales reports coming up

Major Events/Reports

Boris Johnson speaks

British Foreign Secretary Boris Johnson kickstarted a series of speeches about the “road to Brexit” during the later half of the morning London session.

And, well, he basically tried to sound as conciliatory as could be towards both the E.U. and the Britons who didn’t favor Brexit.

As for specifics, Johnson said that:

“We must accept that many [Remainers] are actuated by entirely noble sentiments, a real sense of solidarity with our European neighbours and a desire for the UK to succeed.”

“If we are to carry this project through to national success – as we must – then we must also reach out to those who still have anxieties.”

“I want to try to anatomise at least some of those fears and to show to the best of my ability that they are unfounded and that the very opposite is usually true: that Brexit is not grounds for fear but hope.”

He also tried to soothe listeners of a transition period to soften the blow of an actual Brexit, reassuring them that things will “remain as they are” shortly after Brexit.

Moreover, Johnson also said the following against a second Brexit referendum.

“I say in all candor that if there were to be a second vote I believe that we would simply have another year of wrangling and turmoil and feuding in which the whole country would lose.”

Risk appetite revived in Europe

After yesterday’s bout of risk aversion, risk sentiment apparently flipped back to risk-on during today’s morning London session since most of the major European equity indices opened higher and then proceeded to rake in more gains during the course of the session.

And market analysts say that risk appetite was revived in Europe thanks to a bunch of positive earnings reports, as well as the Euro Zone’s preliminary GDP report which reaffirmed that the Euro Zone economy grew at robust pace in Q4 2017.

  • The pan-European FTSEurofirst 300 was up by 0.68% to 1,463.96
  • Germany’s DAX was up by 0.64% to 12,274.72
  • The blue-chip Euro Stoxx 50 was up by 0.55% to 3,362.50

Even U.S. equity futures got some love because of the risk-on vibes, pointing to the possibility that risk appetite will persist into the upcoming U.S. session.

  • S&P 500 futures were up by 0.39% to 2,672.25
  • Nasdaq futures were up by 0.43% to 6,589.00

Global bond yields fall

Despite signs of returning risk appetite in the European equities and U.S. equity futures markets, bonds were broadly in demand, which caused global bond yields to fall.

Some market analysts point out that the slide in global bond yields was due mainly to demand for risky Southern European government bonds.

In other words, the demand for bonds was driven by risk appetite rather than risk aversion. Well, that’s what some market analysts think.

That doesn’t really explain why bonds of, say, the U.S. or Germany, were also in demand, though.

  • German 10-year bond yield down by 2.40% to 0.731%
  • French 10-year bond yield down by 2.73% to 0.974%
  • U.K. 10-year bond yield down by 1.11% to 1.600%
  • U.S. 10-year bond yield down by 0.44% to 2.828%
  • Canadian 10-year bond yield down by 0.51% to 2.326%

Major Market Mover(s):

JPY

The safe-haven yen didn’t seem to mind the returning risk-on vibes too much. In fact, the yen was the one currency to rule them all during today’s morning London session, very likely because the yen was taking directional cues from the fall in global bond yields.

USD/JPY was down by 16 pips (-0.15%) to 107.24, EUR/JPY was down by 51 pips (-0.39%) to 132.36, GBP/JPY was down by 57 pips (-0.38%) to 148.67

GBP

The pound took a good pounding during the morning London session. There weren’t really any apparent catalysts, but some market analysts said that the pound’s slide likely reflected jitters ahead of Boris Johnson’s speech since Johnson is a well-known Brexiteer, so there were fears that his speech would weaken faith in a transition deal.

As it turns out, however, Johnson tried to sound conciliatory, so the pound’s bleeding stopped… for now at least. The damage was already done, though, and so the pound ended up at the bottom of the forex heap.

GBP/USD was down by 32 pips (-0.23%) to 1.3863, GBP/NZD was down by 65 pips (-0.34%) to 1.8953, GBP/CAD was down by 50 pips (-0.29%) to 1.7435

EUR

The euro was the second weakest currency after the pound, despite better-than-expected industrial production readings and the affirmation that the Euro Zone’s Q4 GDP grew at a robust pace.

Most market analysts were silent on the euro’s slide, but it’s possible that the euro’s slide was linked to the slide in European bond yields.

EUR/USD was down by 29 pips (-0.24%) to 1.2343, EUR/CAD was down by 46 pips (-0.30%) to 1.5523, EUR/CHF was down by 27 pips (-0.24%) to 1.1519

Watch Out For:

  • 1:30 pm GMT: Headline (0.3% expected, 0.1% previous) and core (0.2% expected, 0.3% previous) U.S. CPI
  • 1:30 pm GMT: Headline (0.2% expected, 0.4% previous) and core (0.5% expected, 0.4% previous) U.S. retail sales
  • 2:30 pm GMT: CB’s leading index (-0.2% previous)
  • 3:00 pm GMT: U.S. business inventories (0.3% expected, 0.4% previous)
  • 3:30 pm GMT: U.S. crude oil inventories (2.8M expected, 1.9M previous)