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The Greenback came out on top after barely edging out a win against the Aussie and the Kiwi. The pound, meanwhile, came under pressure after the U.K.’s latest CPI report failed to impress. The pound wasn’t the biggest loser of the session, though, since that (dis)honor goes to the euro.

  • Swiss trade balance: CHF 3.15B vs. CHF 1.87B expected, CHF 2.07B previous
  • German PPI m/m: -0.1% vs. 0.1% expected, 0.5% previous=
  • U.K. CPI m/m: 0.4% vs. 0.5% expected, -0.5% previous
  • U.K. CPI y/y: 2.7% vs. 2.8% expected, 3.0% previous
  • Core U.K. CPI y/y: 2.4% vs. 2.5% expected, 2.7% previous
  • HPI in the U.K. y/y: 4.9% vs. 5.1% expected, 5.0% previous
  • U.K. PPI input m/m: -1.1% vs. -0.9% expected vs. 0.4% previous
  • U.K. PPI output m/m: 0.0% vs. 0.2% expected, 0.1% previous
  • German ZEW economic sentiment: 5.1 vs. 13.1 expected, 17.8 previous
  • Euro Zone ZEW economic sentiment: 13.4 vs. 28.1 expected, 29.3 previous

Major Events/Reports:

U.K. CPI miss expectations

The Office for National Statistics (ONS) released the U.K.’s latest CPI report earlier, revealing that headline CPI recovered by 0.4% month-on-month in February after falling by 0.5% previously.

Unfortunately, this is a tick slower than the expected 0.5% rise.

Despite the monthly recovery, the year-on-year reading came in at 2.7%, missing expectations for a 2.8% annual increase and slowing down from the previous +3.0% reading.

More importantly for rate hike expectations, the +2.7% annual reading is weaker than the BOE’s forecast of +2.9%, as laid out in the February Inflation Report.

The miss therefore likely weakened rate hike expectations a bit. After all, the BOE did state during the February 8 BOE Statement that:

“The Committee judges that, were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report, in order to return inflation sustainably to the target.”

Oil jumps as other commodities fall

Commodities took a beating during the morning London session. However, not all commodities were on the receiving end of a beat-down because oil benchmarks were quite noticeably doing rather well.

The slide in commodity prices was likely due to the Greenback’s relative strength. And just for reference, the U.S. dollar index was up by 0.20% to 89.64 for the day when the session came to an end.

Other than that, some market analysts also blamed lingering fears of a potential trade war, as well as higher inventory levels as weighing down on base metals. The poor performance of precious metals, meanwhile, can also be attributed to dampened safe-haven demand, given the prevalence of risk-taking during the European session.

As for the surge in oil prices, market analysts attributed that to geopolitics, namely lower oil output due to troubles in Venezuela and tensions between Saudi Arabia and Iran.

Base metals were down.

  • Copper was up by 0.32% to $3.067 per pound
  • Zinc was up by 0.28% to $3,244.25 per dry metric ton

Precious metals also suffered.

  • Gold was down by 0.43% to $1,312.10 per troy ounce
  • Silver was down by 0.40% to $16.260 per troy ounce

As mentioned earlier, oil benchmarks were doing rather well.

  • U.S. WTI crude oil was up by 1.35% to $62.97 per barrel
  • Brent crude oil was up by 1.36% to $66.94 per barrel

Appetite for risk revived

Risk-taking was the name of the game during the European session. And evidence for this can be seen in the gains being reported by the major European equity indices.

The European bourses actually had a skittish start, but it soon became clear that risk appetite was the dominant sentiment when the U.K.’s CPI report was released.

And market analysts say that the miss in CPI wasn’t enough to derail expectations for a BOE rate hike within the year. And this helped to boost demand for banking shares, which then improved overall risk sentiment.

The pan-European FTSEurofirst 300 was up by 0.35% to 1,466.30

  • Germany’s DAX was up by 0.40% to 12,265.72
  • The blue-chip Euro Stoxx 50 was up by 0.33% to 3,404.00

U.S. equity futures were also in the green after wallowing in negative territory at the start of the session, which is another sign that risk-taking was the prevailing sentiment in Europe.

  • S&P 500 futures were up by 0.17% to 2,727.50
  • Nasdaq futures were up by 0.11% to 6,921.75

Major Market Mover(s):

USD

The comdolls (AUD, NZD, CAD) were all in demand, likely because of the risk-on vibes and, in the case of the Loonie, the rise in oil prices.

Even so, the Greenback managed to best them all in the end, even though there wasn’t really any apparent driver for the Greenback’s strength.

Given the lack of catalysts, market analysts just shrugged and said that the Greenback’s strength likely reflects preemptive positioning ahead of this week’s FOMC statement and an expected rate hike from the Fed.

USD/JPY was up by 7 pips (+0.07%) to 106.52, USD/CAD was up by 11 pips (+0.08%) to 1.3079, USD/CHF was up by 34 pips (+0.36%) to 0.9543

GBP

The pound had a promising start, likely due to preemptive positioning ahead of the CPI report.

However, it later turned out that CPI failed to meet both the market’s and the BOE’s expectations, and so the selling pressure quickly ramped up, erasing the pound’s earlier gains and causing the pound to close out the session as a loser.

GBP/USD was down by 41 pips (-0.29%) to 1.4010, GBP/AUD was down by 64 pips (-0.36%) to 1.8183, GBP/CAD was down by 38 pips (-0.21%) to 1.8324

EUR

The pound was a major loser during the morning London session. However, the pound wasn’t the biggest loser since that (dis)honor goes to the euro.

There were some low-tier and mid-tier reports that were released during the session, but the euro’s weakness didn’t seem linked to any of them.

Some market analysts tried to pin the euro’s weakness on the disappointing readings for ZEW’s German and Euro Zone economic sentiment. However, bears began hammering the euro at around 8:00 am GMT when there was no direct catalyst and around two hours before those aforementioned reports were released.

EUR/USD was down by 53 pips (-0.43%) to 1.2296, EUR/AUD was down by 78 pips (-0.49%) to 1.5958, EUR/CAD was down by 55 pips (-0.35%) to 1.6083

Watch Out For:

  • 12:30 pm GMT: Canadian wholesale sales (0.1% expected, -0.5% previous)
  • 3:00 pm GMT: Euro Zone consumer sentiment (no expected change from 0 index points)
  • 9:45 pm GMT: New Zealand’s visitor arrivals (0.0% previous)
  • Dairy auction currently underway (-0.6% previous); auction usually ends at around 2:00 pm GMT