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The higher-yielding Kiwi edged out a win against the Greenback to emerge as the top-performing currency, which is rather weird since commodities were broadly in retreat and risk aversion was the name of the  game during the morning London session.

The euro, meanwhile, was swamped by sellers from the get-go and found itself at the bottom of the forex heap.

  • Swiss GDP q/q: 0.6% as expected vs. 0.7% previous
  • U.K. Nationwide HPI m/m: -0.3% vs. 0.2% expected, 0.8% previous
  • Swiss retail sales y/y: -1.4% vs. 1.1% expected, 0.7% previous
  • Spanish manufacturing PMI: 56.0 vs. 54.8 expected, 55.2 previous
  • Swiss manufacturing PMI: 65.5 vs. 64.1 expected, 65.3 previous
  • Italian manufacturing PMI: 56.8 vs. 57.9 expected, 59.0 previous
  • French final manufacturing PMI: 55.9 vs. no change from 56.1 expected
  • German final manufacturing PMI: 60.6 vs. no change from 60.3 expected
  • Euro Zone final manufacturing PMI: 58.6 vs. no change from 58.5 expected
  • U.K. manufacturing PMI: 55.2 vs. 55.0 expected, 55.3 previous
  • U.K. net lending to individuals m/m: 1.5% vs. 0.4% expected, -0.6% previous
  • Euro Zone jobless rate: steady at 8.6% as expected

Major Events/Reports:

U.K. manufacturing PMI

It’s brand new month, which means another batch of manufacturing U.K. PMI reports from Markit.

And first up is the U.K.’s manufacturing PMI, whose headline reading eased slightly further from 55.3 to an eight-month low of 55.2. This marks the third consecutive month of deteriorating readings.

But on a more upbeat note, the consensus is that the reading would dip to 55.0, so the reading is a bit better-than-expected.

Commentary from Markit noted that the slightly weaker reading was due to new export orders increasing at a four-month low and manufacturing production easing to an 11-month low, which were partially offset by firmer domestic demand and the second-fastest increase in payroll numbers since mid-2014.

Commodities broadly retreat (again)

Commodities staged another broad-based retreat during the morning London session. And this time, not even the risk-off vibes could stop precious metals from sliding.

And as usual, market analysts blamed the commodities slide on the Greenback’s relative strength since a stronger U.S. dollar means commodities become relatively more expensive to buy.

And for reference, the U.S. dollar index was up by 0.15% to 90.75 for the day by the end of the session.

Other than that, it’s also possible that earlier rumors that Trump may slap tariffs on steel and aluminum may still be weighing down on commodities, particularly base metals.

Base metals were reeling again.

  • Copper was down by 0.59% to $3.114 per pound
  • Nickel was down by 1.57% to $13,522.50 per dry metric ton

Oil benchmarks were also down in the dumps.

  • U.S. WTI crude oil was down by 0.60% to $61.27 per barrel
  • Brent crude oil was down by 0.79% to $64.22 per barrel

After resisting yesterday, precious metals went with the bearish tide today.

  • Gold was down by 0.65% to $1,309.30 per troy ounce
  • Silver was down by 0.73% to $16.205 per troy ounce

Another round of risk aversion in Europe

Risk aversion is still apparently the name of the game in Europe since the major European equity indices were broadly in negative territory again today.

Market analysts are still blaming the risk-off vibes on speculation that monetary policy will tighten soon. Although market analysts also cited not so positive earnings reports and updates as another reason for the feelings of doom and gloom in Europe.

  • The pan-European FTSEurofirst 300 was down by 1.01% to 1,472.29
  • Germany’s DAX was down by 1.52% to 12,247.00
  • The blue-chip Euro Stoxx 50 was down by 1.03% to 3,404.50

U.S. equity futures were also leaking red, hinting that the risk-off vibes may spill over into the upcoming U.S. session.

  • S&P 500 futures were down by 0.27% to 2,707.25
  • Nasdaq futures were down by 0.21% to 6,850.75

Global bond yields slump (again)

The persistent risk-off vibes apparently spurred safe-haven demand for bond, pushing global bond yields lower.

Oddly enough, even U.S. yields slumped, despite higher inflation expectations and reinforced expectations for a further Fed rate hikes.

  • German 10-year bond yield down by 3.93% to 0.636%
  • French 10-year bond yield down by 2.22% to 0.908%
  • U.K. 10-year bond yield down by 2.93% to 1.458%
  • U.S. 10-year bond yield down by 0.83% to 2.844%
  • Canadian 10-year bond yield down by 0.81% to 2.216%

Major Market Mover(s):

NZD

The higher-yielding Kiwi has been rising against its peers since the late Asian session. And it continued to do so during the morning London session.

Heck, the Kiwi even edged out a win against the Greenback and was the best-performing currency to boot.

Oddly enough, there wasn’t really any apparent catalyst for the Kiwi’s strength. Not only that, commodities were broadly in decline and risk aversion continued to plague Europe for yet another day.

Some market analysts attributed the Kiwi’s rise on New Zealand’s better-than-expected terms of trade from yesterday. However, the Kiwi’s rise began long after the report was released, so I’m not too sure about that explanation.

However, it’s possible that we’re just seeing some short-covering since the Kiwi has been a net loser for most of the week. Another possibility is that the Kiwi is getting genuine due to the Kiwi’s yield advantage, thanks to the sustained slide in global bond yields.

NZD/USD was up by 8 pips (+0.10%) to 0.7217, NZD/CHF was up by 17 pips (+0.25%) to 0.6830, NZD/CAD was up by 24 pips (+0.26%) to 0.9276

EUR

The euro encountered sellers from the get-go and was the worst-performing currency of the session.

The economic reports released during the session were mid-tier at best and most were released after the euro already started moving. They were therefore unlikely to have been the catalysts.

However, some market analysts say that the euro may have been hurt by monetary policy divergence because of the Fed’s hawkish tune and the ECB’s more dovish tone,  as well as political uncertainty because of the upcoming Italian elections and the SPD vote on the German coalition deal.

EUR/USD was down by 31 pips (-0.26%) to 1.2168, EUR/GBP was down by 18 pips (-0.20%) to 0.8854, EUR/NZD was down by 57 pips (-0.34%) to 1.6864

Watch Out For:

  • 1:30 pm GMT: Canada’s current account (-$17.65B expected, -$19.35B previous)
  • 1:30 pm GMT: Core PCE price index (0.3% expected, 0.2% previous)
  • 1:30 pm GMT: U.S. personal spending (0.2% expected, 0.4% previous) and personal income (0.2% expected, 0.4% previous)
  • 1:30 pm GMT: U.S. initial jobless claims (226K expected, 222K previous)
  • 2:30 pm GMT: Markit’s Canadian manufacturing PMI (55.9 previous)
  • 2:45 pm GMT: Markit’s U.S. final manufacturing PMI (slight downgrade from 55.9 to 55.8 expected)
  • 3:00 pm GMT: Fed Chair Powell will testify
  • 3:00 pm GMT: ISM U.S. manufacturing PMI (58.7 expected, 59.1 previous)
  • 9:45 pm GMT: New Zealand’s building consents (-9.6% previous)