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Most pound pairs have been sliding since the late Asian session. And the pound only added to those losses during the London session.

The pound wasn’t the biggest loser, though, since that (dis)honor goes to the euro, thanks to a rush of late sellers after the ECB minutes were released.

As for the session’s champ, that happens to be the yen, likely because of yet another round of risk aversion in Europe.

  • French final HICP m/m: unchanged at -0.1% as expected
  • French final HICP y/y: unchanged at 1.5% as expected
  • German IFO business climate: 115.4 vs. 117.0 expected, 117.6 previous
  • German IFO business expectations: 105.4 vs. 107.9 expected, 108.4 previous
  • U.K. second Q4 GDP estimate q/q: 0.4% vs. unchanged at 0.5% expected
  • U.K. second Q4 GDP estimate y/y: 1.4% vs. unchanged at 1.5% expected
  • Business investment in U.K. q/q: 0.0% vs. 0.5% expected and previous
  • Business investment in U.K. y/y: 2.1% vs. 2.4% expected, 1.7% previous

Major Events/Reports:

ECB’s meeting minutes

The minutes of the ECB’s most recent huddle were finally released late into the session. And reading quickly through the minutes, there wasn’t really anything completely new or surprising.

However, the minutes did reiterate the ECB’s somewhat cautious stance during the ECB statement.

For instance, the minutes noted that:

“[C]hanges in communication were generally seen to be premature at this juncture, as inflation developments remained subdued despite the robust pace of economic expansion.”

“It was emphasised that monetary policy had to remain patient and persistent, while prudence should be exercised with respect to the Governing Council’s communication.”

“Members broadly agreed that any further evolution of the Governing Council’s communication on monetary policy would be gradual and would proceed in line with improvements in the medium-term inflation outlook.”

The minutes also parroted ECB Overlord Draghi’s concerns over the euro’s relative strength, as discussed during the ECB presser.

To quote directly from the minutes:

“There was broad agreement among members to convey the Governing Council’s concerns about the recent volatility in the euro exchange rate, which represented a source of uncertainty that had to be monitored with respect to its implications for the medium-term outlook for price stability.”

However, the minutes did say that the ECB is not in the currency intervention business, unlike some other central banks (*cough* the sneaky SNB *cough*):

“In this context, it was also seen as important to reaffirm the agreed G7 and G20 exchange rate language, which entailed the commitment to market-determined exchange rates and refraining from targeting them for competitive purposes.”

Moreover, the minutes showed that the ECB is still likely on course to changing its tune to a more hawkish one “early this year.

To quote the minutes directly:

“The language pertaining to the monetary policy stance could be revisited early this year as part of the regular reassessment at the forthcoming monetary policy meetings. In this context, some members expressed a preference for dropping the easing bias regarding the APP from the Governing Council’s communication as a tangible reflection of reinforced confidence in a sustained adjustment of the path of inflation. “

U.K. GDP revised lower

The second estimate of the U.K.’s Q4 2017 GDP growth was revised lower from +0.5% quarter-on-quarter to +0.4%.

Given the downgrade for the quarterly reading, growth for all of 2017 was also downgraded from +1.8% to +1.7%, which is the weakest since 2012.

The year-on-year reading, meanwhile, was also revised lower from +1.5% to +1.4%, which is the weakest rate of annual expansion since Q2 2012.

A breakdown using the expenditure approach was also finally available and it showed that consumer spending weakened, coming in at just 0.3% quarter-on-quarter (+0.4% previous).

Net trade was also a major drag on GDP growth due to exports falling by 0.2% while imports surged by 1.5%.

Business investment was also a disappointment since it came in flat for the quarter, missing expectations that it would match the previous quarter’s +0.5%.

As a side note, the 0.6% increase in government spending helped to buoy the U.K. economy since it added 0.1% to total quarterly GDP growth.

More risk aversion in Europe

Europe was apparently hit by another wave of risk aversion that sent most of the major European equity indices reeling in pain.

Market analysts say that the risk-off vibes in Europe was due to risk sentiment spillover from the earlier session after the latest FOMC minutes buttressed inflation expectations and reinforced the idea that the Fed will hike again soon. And that will sooner or later lead to tigher credit conditions and slower growth.

  • The pan-European FTSEurofirst 300 was down by 0.53% to 1,483.76
  • Germany’s DAX was down by 0.65% to 12,389.50
  • The blue-chip Euro Stoxx 50 was down by 0.31% to 3,419.50

Major Market Mover(s):


The pound was already showing weakness since the late Asian session and that weakness only intensified when the U.K.’s Q4 GDP growth readings were revealed to have been downgraded.

GBP/USD was down by 9 pips (-0.07%) to 1.3878, GBP/JPY was down by 62 pips (-0.42%) to 148.60, GBP/CHF was down by 36 pips (-0.28%) to 1.3022


The euro was actually mixed and steady for the most part. However, the euro later tried to jump higher after the ECB’s meeting minutes were released, only to stop and plunge to the downside when the minutes repeated the ECB’s somewhat cautious message and didn’t really reveal anything new.

EUR/USD was down by 5 pips (-0.04%) to 1.2269, EUR/JPY was down by 54 pips (-0.41%) to 131.35, EUR/CHF was down by 31 pips (-0.27%) to 1.1510


The yen trumped all its peers during the morning London session, very likely because of the persistent risk-off vibes.

USD/JPY was down by 42 pips (-0.39%) to 107.04, NZD/JPY was down by 22 pips (-0.28%) to 78.39, CAD/JPY was down by 28 pips (-0.34%) to 84.32

Watch Out For:

  • 1:30 pm GMT: Headline (0.0% expected, 0.2% previous) and core (0.3% expected, 1.6% previous) readings for Canadian retail sales; read Forex Gump’s Event Preview
  • 1:30 pm GMT: U.S. initial jobless claims (230K expected, same as previous)
  • 3:00 pm GMT: CB’s leading U.S. index (0.7% expected, 0.4% previous)
  • 3:00 pm GMT: New York Fed President William Dudley is scheduled to speak
  • 4:00 pm GMT: U.S. crude oil inventories (2.2M expected, 1.8M previous)
  • 5:10 pm GMT: Atlanta Fed President Raphael Bostic will speak
  • 9:45 pm GMT: Headline (1.4% expected, 0.2% previous) and core (0.7% expected, 0.5% previous) reading for New Zealand’s quarterly retail sales