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Directional movement and volatility were both in short supply during today’s morning London session, with many currency pairs trading sideways in tight ranges.

Price action on Swissy pairs was also choppy. However, the Swissy is worth noting since it was slightly down across the board during the session.

  • French trade balance: -€5.56B vs. -€4.45B expected, -€3.47B previous
  • Swiss foreign currency reserves: CHF 733B vs. CHF 732B previous
  • Halifax U.K. HPI m/m: 0.4% as expected, -0.5% previous
  • Euro Zone revised GDP q/q: unchanged at +0.6% as expected
  • ADP report coming up
  • BOC monetary policy statement later

Major Events/Reports:

E.U.’s Brexit draft guidelines leaked

The E.U.’s Brexit draft guidelines were leaked earlier. And according to the document, the U.K.’s stubborn position on some issues “limit the depth of such a future partnership” with the E.U. and this “unfortunately will have negative economic consequences.”

Even so, “the European Council confirms its readiness to initiate work towards a free trade agreement (FTA), to be finalised and concluded once the UK is no longer a Member State.”

However, the E.U. also stressed that “Such an agreement cannot offer the same benefits as Membership and cannot amount to participation in the Single Market or parts thereof.”

And it looks like the U.K.’s financial services industry will take the brunt of it since the document highlighted that:

“[T]rade in services, with the aim of allowing market access to provide services under host state rules, including as regards right of establishment for providers, to an extent consistent with the fact that the UK will become a third country and the Union and the UK will no longer share a common regulatory, supervisory, enforcement and judiciary framework.”

In other words, U.K. banks will only have limited access to the E.U. single market. And that will be bad for the U.K.

But on a slightly happier note, the E.U. is ready to have zero tariffs on trade.

To quote directly from the document:

“[T]rade in goods, with the aim of covering all sectors, which should be subject to zero tariffs and no quantitative restrictions with appropriate accompanying rules of origin.”

Commodities retreat

The broad-based commodities rally finally came to an end today since commodities were broadly in retreat.

The Greenback is slightly higher for the day, which may have spooked some market players.

And for reference, the U.S. dollar index is up by 0.03% to 89.58 by the end of the session.

However, the likely reason for the commodities slide is the current narrative that Cohn’s resignation has renewed fears of potential trade wars. Even other market analyst think as much.

Base metals were reeling in pain.

  • Copper was down by 1.04% to $3.126 per pound
  • Nickel was down by 1.47% to $13,432.50 per dry metric ton

Precious metals were also down.

  • Gold was down by 0.28% to $1,331.50 per troy ounce
  • Silver was down by 0.71% to $16.665 per troy ounce

And the same can be said of oil benchmarks.

  • U.S. WTI crude oil was down by 0.53% to $62.27 per barrel
  • Brent crude oil was down by 0.52% to $65.44 per barrel

Risk sentiment recovers in Europe

The major European equity indices opened lower and then proceeded to plumb new lows.

However, the major European equity indices later made a U-turn and began erasing their losses, with some already in the green by the end of the morning London session.

Market analysts blamed the earlier risk-off vibes on renewed fears of a potential trade war since the resignation of Gary Cohn, economic adviser to President Trump, is supposedly seen as pushing the pendulum towards protectionism.

As for the recovery in risk sentiment, there’s no clear reason for that yet.

  • The pan-European FTSEurofirst 300 was down by by 0.03% to 1,453.06 but off the day’s low at 1,444.06
  • Germany’s DAX was already up by 0.47% to 12,170.66
  • The blue-chip Euro Stoxx 50 was already up by 0.10% to 3,362.50

Major Market Mover(s):

CHF

The Swissy initially showed strength when the morning London session opened with some risk aversion. However, the Swissy later weakened across the board when risk sentiment began to recover.

USD/CHF was up by 11 pips (+0.12%) to 0.9398 after hitting a session low of 0.9365 earlier, AUD/CHF was up by 9 pips (+0.11%) to 0.7344 after hitting a session low of 0.7309 earlier, EUR/CHF was up by 8 pips (+0.07%) to 1.1671 after hitting a session low of 1.1641 earlier

Watch Out For:

  • 1:15 pm GMT: ADP’s U.S. private non-farm employment change (200K expected, 234K previous)
  • 1:20 pm GMT: New York Fed President William Dudley will speak
  • 1:30 pm GMT: Canada’s trade balance (-C$2.5B expected, -C$3.2B previous)
  • 1:30 pm GMT: U.S. trade balance (-$55.0B expected, -$53.1B previous)
  • 3:00 pm GMT: BOC monetary policy statement (overnight rate steady at 1.25% expected)
  • 3:30 pm GMT: U.S. crude oil inventories (2.6M expected, 3.0M previous)
  • 7:00 pm GMT: The Fed’s so-called “Beige Book” will be released
  • 8:00 pm GMT: U.S. consumer credit ($18.40B expected, $18.45B previous)
  • 9:45 pm GMT: New Zealand’s quarterly manufacturing sales (0.5% previous)