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The forex calendar for today’s morning London session was rather sparse. Even so, there was enough action to keep the session interesting, since the euro got kicked broadly lower while the Greenback staged a broad-based recovery.

  • SNB sight deposits: CHF 575,852M vs. CHF 576,028M previous

Major Events/Reports:

ECB’s Coeuré & Smets speak

ECB Board Members Benoit Coeuré and Jan Smets were getting some press earlier.

Coeuré’s interview came out first and he said that:

“It is very clear to us that short term interest rates, the ones that are controlled by the central bank, will remain at very low levels, far beyond the horizon of our asset purchases.”

And while the ECB did remove its easing bias on its QE program last week, Coeuré said that the timing for an exit wasn’t discussed yet since “Inflation is not quite where we would like it to be,” which is the same cautious stance that ECB Overlord Draghi communicated last week.

As for Smets, he said in his interview with Reuters that:

“It will take somewhat more time to get to the objective than we thought earlier.”

“It may take more than we thought and inflation pressures could take more time to build.”

“[I]t is absolutely crucial that we meet our price stability objective and not accept a level below that; the objective is what it is and we are not there yet.”

Basically, Smets sang the same dovish tune as Coeuré and Draghi, which is a bit disappointing for those who want to see clues when the ECB will finally tighten monetary policy.

Some risk-taking to start the week

Europe is apparently starting the new trading week on an optimistic note since the major European equity indices were broadly higher for the day when the morning London session came to an end.

And market analysts say that the risk-on vibes was due to last Friday’s NFP report since the stronger-than-expected strong jobs growth is a good sign for the U.S. economy but the miss in wage growth is supposedly seen as a sign that inflation likely won’t pick up too quickly, which lowers the risk of further hikes.

And a slower path towards tightening monetary policy means easier credit conditions, hence the demand for riskier assets such as European equities.

  • The pan-European FTSEurofirst 300 was up by 0.33% to 1,484.28
  • Germany’s DAX was up by 0.68% to 12,430.50
  • The blue-chip Euro Stoxx 50 was up by 0.65% to 3,440.00

U.S. equity futures also got in on the risk-friendly party, which implies that the risk-on vibes may carry over into the upcoming U.S. session.

  • S&P 500 futures were up by 0.30% to 2,797.25
  • Nasdaq futures were up by 0.54% to 7,162.50

Global bond yields retreat

Global bond yields were in decline, with European bond yields leading the way, even though there were signs of risk-taking in the European equities and U.S. equity futures markets.

Global bond yields were likely dragged lower by the slide in European bond yields. And market analysts say that European bond yields were down in the dumps because of ECB member Coeuré’s dovish comments earlier.

  • German 10-year bond yield down by 2.92% to 0.632%
  • French 10-year bond yield down by 2.38% to 0.879%
  • U.K. 10-year bond yield down by 0.14% to 1.492%
  • U.S. 10-year bond yield down by 0.02% to 2.894%
  • Canadian 10-year bond yield down by 0.13% to 2.269%

Major Market Mover(s):


The euro was down in the dumps during the morning London session. ECB member Coeuré’s said some rather dovish things earlier, but the euro initially reacted by jumping higher before sliding lower when European bond yields also began sliding.

It’s possible that the euro’s jump was due to short-covering by euro shorts in the wake of the ECB statement since Coeuré’s (and Smets’) comments do hint that ECB Overlord Draghi’s dovish comment last week is the general thought in the ECB.

As for the later selling, there wasn’t really any apparent catalyst for that. Smets did repeat Coeuré’s dovish message, and that may have attracted more selling pressure, but the euro was already on its way down before then.

However, the slide in European bond yields was blamed on Coeuré and the euro began to slide when European bond yields began to slide, so it’s likely that the selling pressure was due to follow-through selling due to Coeuré’s statement since Coeuré’s statement reinforced the idea of monetary policy divergence between the ECB and the Fed, as some market analysts suggest.

EUR/USD was down by 46 pips (-0.37%) to 1.2291, EUR/CHF was down by 31 pips (-0.26%) to 1.1683, EUR/GBP was down by 22 pips (-0.25%) to 0.8872


The Greenback is still a net loser for the day. With that said, it erased a large chunk of its losses during the morning London session.

In fact, the Greenback edged out a win against the yen and was the best-performing currency of the morning London session.

As to what triggered the Greenback’s broad-based recovery, there’s no clear reason for that. But as mentioned earlier when I discussed the euro, some market analysts suggest that Coeuré’s statement reinforced the idea of monetary policy divergence between the ECB and the Fed, so selling pressure on the euro may have given the Greenback a boost.

Another possible reason is that we’re just seeing some short-covering since the Greenback did get a beating from most pairs because of the miss in wage growth last Friday.

USD/JPY was up by 4 pips (+0.04%) to 106.62, USD/CHF was up by 10 pips (+0.11%) to 0.9505, USD/CAD was up by 23 pips (+0.19%) to 1.2835

Watch Out For:

  • 6:00 pm GMT: U.S. Federal budget balance: -$223.0B expected, $49.2B previous
  • 9:45 pm GMT: New Zealand’s FPI (1.2% previous)