Today’s morning London session was rather wonky since the higher-yielding Kiwi outperformed its peers while the safe-havens Swissy and yen were at the bottom of the forex heap. By the way, did I mention that today is another risk-off day?
- No major economic reports were released during the European session
- Canada’s CPI and retail sales reports coming up
EU adopts Brexit guidelines
Donald Tusk, the President of the European Council, followed Donald Trump’s example by announcing the following via a tweet:
Decision: EU27 has adopted guidelines for the future EU-UK relations after #Brexit
— Donald Tusk (@eucopresident) March 23, 2018
More trade war stuff
The U.S. lodged a formal complaint against China at the World Trade Organization (WTO), targeting China’s protectionist intellectual property policies.
And according to a statement from the Offices of the U.S. Trade Representative:
“China appears to be breaking WTO rules by denying foreign patent holders, including U.S. companies, basic patent rights to stop a Chinese entity from using the technology after a licensing contract ends.”
“China also appears to be breaking WTO rules by imposing mandatory adverse contract terms that discriminate against and are less favorable for imported foreign technology.”
More risk aversion in Europe
The European equity indices were bleeding out today, which means that risk aversion is still plaguing the European market yet again.
Like yesterday, market analysts blamed today’s bout of risk aversion on renewed fears of a potential trade war between the U.S. and China after Trump slapped tariffs on some Chinese imports.
However, it’s also possible that risk sentiment took a hit after news of yet another terrorist attack in France earlier.
- The pan-European FTSEurofirst 300 was down by 1.14% to 1,427.87
- Germany’s DAX was down by 1.60% to 11,906.92
- The blue-chip Euro Stoxx 50 was down by 1.25% to 3,300.55
U.S. equity futures were also leaking red, implying that the risk-off vibes will likely carry over into the upcoming U.S. session.
- S&P 500 futures were down by 0.29% to 2,635.50
- Nasdaq futures were down by 0.81% to 6,638.00
Global bond yields recover
Global bond yields were in the red earlier, but they clawed their way higher during the course of the session and are now in the green for the day, even though risk aversion was the more dominant sentiment in the European equities and U.S. equity futures markets.
No clear reason for the rise in global bond yields yet, but it’s possible that market players who bought up bonds yesterday were unwinding some of their positions today, pushing bond yields higher.
- German 10-year bond yield up by 0.56% to 0.534%
- French 10-year bond yield up by 1.42% to 0.783%
- U.K. 10-year bond yield up by 0.90% to 1.452%
- U.S. 10-year bond yield up by 0.25% to 2.839%
- Canadian 10-year bond yield up by 0.18% to 2.182%
Major Market Mover(s):
The higher-yielding Kiwi was the top-performing currency of the morning London session, which is really weird because risk aversion was the name of the game in Europe. Perhaps we’re just seeing some short-covering on the Kiwi?
NZD/USD was up by 16 pips (+0.22%) to 0.7249, NZD/CHF was up by 16 pips (+0.23%) to 0.6868, NZD/JPY was up by 20 pips (+0.27%) to 76.16
JPY & CHF
The safe-havens yen and Swissy were the two worst-performing currencies of the morning London session, even though risk aversion continued to dominate in the European markets.
We can attribute the yen’s weakness on the recovery in global bond yields at least. As for the Swissy’s weaknesss, there’s no clear reason for that. Perhaps the SNB is taking this opportunity to sneakily weaken the Swissy?
USD/JPY was up by 7 pips (+0.07%) to 105.09, EUR/JPY was up by 30 pips (+0.23%) to 129.70, GBP/JPY was up by 26 pips (+0.18%) to 148.36
USD/CHF was up by 3 pips (+0.03%) to 0.9473, EUR/CHF was up by 22 pips (+0.19%) to 1.1694, GBP/CHF was up by 19 pips (+0.14%) to 1.3376
Watch Out For:
- 12:30 pm GMT: Headline (1.1% expected vs. -0.8% previous) and core (0.9% expected vs. -1.8% previous) readings for Canadian retail sales; read Forex Gump’s Event Preview
- 12:30 pm GMT: Canada’s headline CPI reading (+0.4% expected vs. +0.7% previous); read Forex Gump’s Event Preview
- 12:30 pm GMT: BOE MPC Member Gertjan Vlieghe will speak
- 12:30 pm GMT: Headline (1.6% expected vs. -3.6% previous) and core (0.5% expected vs. -0.3% previous) readings for U.S. durable goods orders
- 1:00 pm GMT: CB’s Chinese leading index (1.6% previous)
- 2:00 pm GMT: U.S. new home sales (622K expected, 593K previous)