The pound was the top-performing currency of the morning London session. Although it’s worth noting that the pound’s price action was rather wonky, especially the hard drop and quick recovery late into the session.
The Swissy, meanwhile, closed the session lower across the board, likely because of signs that risk appetite was the more dominant sentiment in Europe.
- German final GDP q/q: unchanged at 0.6% as expected
- Euro Zone final HICP y/y: unchanged at 1.3% as expected
- Euro Zone final core HICP y/y: unchanged at 1.0% as expected
- Canada’s CPI report coming up; read Forex Gump’s Event Preview
Theresa May to speak next Friday
A spokesman for British PM Theresa May announced earlier today that after “a very positive meeting” with senior cabinet members yesterday, Theresa May is expected to “deliver her speech next Friday” on her vision of “the future relationship” with the E.U.
The spokesman also added that “the message is that we are working towards securing a deal which will deliver as frictionless trade as possible, and will be a good deal for all parts of the United Kingdom, and we believe that that is a deal that everyone should be able to support.”
However, the spokesman also remained firm on the U.K.’s position that “In terms of people who are arriving after March 2019, they arrive under a different set of circumstances to those who arrived before, with different expectations, and you can expect their rights to reflect that. Their rights will be different.” And that will likely be a source of conflict in the future.
A little risk-taking to end the week
The European equity indices opened firmed before retreating and then bouncing back up again later to close out the morning London session mostly in the green.
This implies that risk sentiment was a bit mixed, but that risk appetite was the more dominant sentiment in Europe.
Market analysts say the mixed risk sentiment in Europe was due to mixed reports and updates that were released during the session.
As to why risk-taking eventually began to show signs of dominating, there’s no clear reason for that.
- The pan-European FTSEurofirst 300 was up by 0.08% to 1,490.53
- Germany’s DAX was up by 0.21% to 12,488.52
- The blue-chip Euro Stoxx 50 was still down by 0.02% to 3,438.50 but is already off the day’s low at 3,425.50
U.S. equity futures were also in the green, reinforcing the idea that risk appetite was the prevailing sentiment in Europe.
- S&P 500 futures were up by 0.41% to 2,722.75
- Nasdaq futures were up by 0.46% to 6,820.00
Global bond yields slump
Despite signs that risk appetite is the more dominant sentiment in the European equities and U.S. equity futures markets, bonds were actually in demand, which pulled global bond yields lower.
- German 10-year bond yield down by 6.37% to 0.661%
- French 10-year bond yield down by 4.62% to 0.942%
- U.K. 10-year bond yield down by 1.94% to 1.518%
- U.S. 10-year bond yield down by 1.19% to 2.882%
- Canadian 10-year bond yield down by 1.17% to 2.272%
Major Market Mover(s):
The pound outpaced all its peers and was the top-performing currency of the session, even though there were no positive catalysts and the announcement of Theresa May’s speech next Friday sent a mixed message.
Market analysts cited mainly higher rate hike expectations because of hawkish comments from BOE officials, especially Haldane’s speech on Wednesday, as the reasons for the pound’s rise.
Also, the pound suffered a sharp drop near the end, but promptly recovered. There was no clear reason for this and the announcement about Theresa May’s speech came after the pound already dropped.
However, some traders say (without citing any sources) that it was just a so-called “fat finger” moment wherein a trader for one of the large players supposedly made a mistake.
GBP/USD was up by 50 pips (+0.36%) to 1.3990 but dropped to 1.3905 earlier, GBP/CHF was up by 53 pips (+0.41%) to 1.3084 but dropped to 1.3007 earlier, GBP/AUD was up by 59 pips (+0.34%) to 1.7876 but dropped to 1.7799 earlier
The Swissy was the worst-performing currency of the session, very likely because of signs that risk appetite was the more dominant sentiment in Europe.
CAD/CHF was up by 15 pips (+0.20%) to 0.7369, AUD/CHF was up by 7 pips (+0.10%) to 0.7318, EUR/CHF was up by 6 pips (+0.05%) to 1.1502
Watch Out For:
- 1:30 pm GMT: Canada’s CPI reading (+0.4% expected, -0.4% previous); read Forex Gump’s Event Preview
- 2:00 pm GMT: CB’s Chinese leading index (1.7% previous)
- 3:15 pm GMT: New York Fed President William Dudley is expected to speak in a panel discussion
- 4:00 pm GMT: Fed monetary policy report will be released
- 6:30 pm GMT: Cleveland Fed President Loretta Mester is scheduled to speak
- 8:40 pm GMT: San Francisco Fed President John Williams will speak