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The safe-haven yen really enjoyed the risk-off vibes during the morning London session, so much so that the yen ended up being the top-performing currency of the session.

The pound, meanwhile, got swamped by sellers before and after the U.K.’s jobs report was released.

  • French flash manufacturing PMI: 56.1 vs. 58.0 expected, 58.4 previous
  • French flash services PMI: 57.9 vs. 59.0 expected, 59.2 previous
  • German flash manufacturing PMI: 60.3 vs. 60.5 expected, 61.1 previous
  • German flash services PMI: 55.3 vs. 57.0 expected, 57.3 previous
  • Euro Zone flash manufacturing PMI: 58.8 vs. 59.2 expected, 59.6 previous
  • Euro Zone flash services PMI: 56.7 vs. 57.6 expected, 58.0 previous
  • U.K. jobless rate: 4.4% vs. steady at 4.3% expected
  • U.K. average earning (3m y/y): 2.5% as expected, same as previous
  • Claimant count change in the U.K.: -7.2K vs. 2.3K expected, 6.2K previous

Major Events/Reports:

U.K. jobs report

We finally got our hands on the U.K.’s latest jobs report earlier today. And according to the report, the jobless rate in the U.K. ticked higher from the record low of 4.3% to 4.4% during the three months to December.

This is the first uptick since the three months to February 2016, which is a bit of a downer. And all the more so, given that expectations were for the jobless rate to hold steady.

But on a more positive note, the number of people who claimed unemployment benefits fell by 7.2K in January instead of rising by 2.3K as expected.

Moreover, average weekly earnings grew by 2.8% year-on-year, picking up the pace from the previous month’s +2.3%. This brings the three-month average to 2.5%, which is within expectations and same pace as the two previous months.

Even better, if bonuses are stripped, then average weekly earnings still grew by 2.6% year-on-year, which is faster than the previous month’s +2.3%. Not only that, the three-month average for regular earnings comes in at +2.5%, which is the best reading since December 2016.

Sadly, real wage growth (inflation is taken into account) continues to take hits, with real regular earnings falling by 0.1% year-on-year. But on the bright side this is a weaker slide compared to the previous 0.5% slide.

Overall, the U.K.’s latest jobs report is mixed since there were positive undertones on wage growth, given that average hourly earnings picked up the pace and the slide in real wage growth softened a bit.

However, the uptick in jobless rate, which is the first in almost two years, is a bit disappointing. Also, the fact that wage growth continues to lag against inflation likely won’t do any favors for consumer spending and GDP growth down the road.

Euro Zone PMI reports disappoint

Markit released a bunch of PMI reports for Germany, France, and the Euro Zone earlier during the session. And, well, they all failed to meet the market’s expectations.

Focusing only on the PMI report for the Euro Zone as a whole,  manufacturing PMI dropped from 59.6 to a four-month low of 58.5 in January. In contrast, the market was only expecting a softer slide to 59.2.

Meanwhile, the Euro Zone’s flash services PMI reading also dropped from 58.0 to 56.7, a much deeper fall compared to expectations that the reading would only tumble to 57.6.

And according to commentary from Markit, the weaker readings for both the manufacturing and service sectors mainly reflect slower output and new orders growth.

Risk aversion returns to Europe

Risk sentiment apparently switched back to risk-off during today’s morning London session since most of the major European equity indices were leaking red.

Market analysts blamed the risk-off vibes on jitters ahead of the FOMC minutes since the minutes are supposedly expected to reinforce expectations for higher inflation. And that, in turn, means tighter monetary policy and more difficult credit conditions.

Although it’s also possible that the disappointing Euro Zone PMI reports helped to sour risk sentiment since the slide in European bond yields was blamed on the poor PMI reports.

  • The pan-European FTSEurofirst 300 was down by 0.35% to 1,484.71
  • Germany’s DAX was down by 0.59% to 12,414.50
  • The blue-chip Euro Stoxx 50 was down by 0.48% to 3,419.50

Global bond yields fall

Another sign that risk aversion was the dominant sentiment in Europe was the high demand for global bonds, which caused global bonds yields to retreat.

Although some market analysts say that global bond yields were dragged lower by the slump in European bond yields. And European bond yields were down, in turn, because of the Euro Zone’s disappointing PMI reports.

  • German 10-year bond yield down by 4.09% to 0.707%
  • French 10-year bond yield down by 0.30 to 0.987%
  • U.K. 10-year bond yield down by 2.08% to 1.554%
  • U.S. 10-year bond yield down by 0.19% to 2.888%
  • Canadian 10-year bond yield down by 0.65% to 2.309%

Major Market Mover(s):


The pound was stomped lower by sellers ahead of the U.K.’s jobs report. Aside from a possible leak, there weren’t any apparent negative catalysts for the pound’s slide and market analysts only stated the obvious when they pointed out that the pound was in retreat.

And when the U.K.’s jobs report was finally released, the pound tried to jump higher, likely because average hourly earnings picked up the pace and the slide in real wage growth decelerated.

However, selling pressure ultimately won out, so traders were apparently more focused on the negative aspects of the jobs report.

Well, that or the pound bulls who rode the pound higher yesterday were using the jobs report to exit their positions ahead of the BOE Inflation Report hearings later.

GBP/USD was down by 60 pips (-0.43%) to 1.3919, GBP/NZD was down by 92 pips (-0.48%) to 1.8955, GBP/JPY was down by 100 pips (-0.66%) to 149.66


The yen was easily the best-performing currency of the morning London session, very likely due to the double boost from the risk-off vibes and falling bond yields.

USD/JPY was down by 23 pips (-0.22%) to 107.53, EUR/JPY was down by 40 pips (-0.30%) to 132.32, CHF/JPY was down by 29 pips (-0.26%) to 114.62

Watch Out For:

  • 2:15 pm GMT: BOE Guv’nah Carney and other MPC members are expected to testify at the Inflation Report hearings
  • 2:45 pm GMT: Markit’s flash U.S. manufacturing PMI (55.4 expected, 55.5 previous)
  • 2:45 pm GMT: Markit’s flash U.S. services PMI (53.8 expected, 53.3 previous)
  • 3:00 pm GMT: U.S. existing home sales (5.61M expected, 5.57M previous)
  • 3:30 pm GMT: CB’s leading Australian index (0.3% previous)
  • 7:00 pm GMT: FOMC meeting minutes scheduled for release