The pound and the euro were in a race to the bottom during the morning London session, with the pound being the bigger loser of the two, which is a reversal of the pound’s performance during yesterday’s morning London session.
As for other currencies of note, there’s the Greenback since it was in recovery mode and was even the top-performing currency of the session after getting battered yesterday.
- German import prices m/m: -0.6% vs. -0.3% expected, 0.5% previous
- German import prices y/y: -0.6% vs. -0.3% expected, 0.7% previous
- Spanish HICP m/m: 1.2% vs. 0.1% previous
- Spanish HICP y/y: 1.3% vs. 1.5% expected, 1.2% previous
- Economic confidence in the Euro Zone: 112.6 vs. 113.3 expected, 114.2 previous
- Consumer confidence in the Euro Zone: steady at 0.1 as expected
- Euro Zone industrial sentiment: 6.4 vs. 6.9 expected, 8.0 previous
- Euro Zone business climate: 1.34 vs. 1.36 expected, 1.48 previous
- Private loans in the Euro Zone y/y: 2.9% vs. 3.0% expected, 2.9% previous
- Business loans in the Euro Zone y/y: 3.1% vs. 3.4% previous
ECB’s Liikanen speaks
ECB Governing Council Member Erkki Liikanen got some press time earlier. And Liikanen said the following during the interview:
“A gradual tightening of monetary policy will rest on a more solid basis when indications of inflation rates to potentially temporarily exceed 2 percent become more prominent in inflation expectations.”
Liikanen also said that the ECB’s “basic message is very positive.” However, he also stressed that there aren’t yet any “trustworthy” signs that inflation is picking up in a sustainable manner.
And since the ECB’s “monetary policy is and will be data dependent. So we [the ECB] must follow fresh incoming data every time.”
And that’s why “We said we’re extending net asset purchases until September and beyond if needed,” according to Liikanen.
Liikanen’s cautious view is more in-line with ECB Overlord Draghi’s way of thinking, which implies that Weidmann’s more hawkish view from yesterday is not the dominant view in the ECB.
FPC meeting minutes
Earlier today, the BOE’s Financial Policy Committee (FPC) released the minutes of their March 12 meeting.
And reading quickly through the minutes, there wasn’t really anything new or surprising since the minutes merely reiterated the BOE’s message during the FPC statement.
The BOE, for instance, reiterated that “material risks remained, particularly in areas where actions would be needed by both the UK and EU authorities.”
The BOE also repeated its more optimistic assessment that “apart from those related to Brexit, domestic risks remained at a standard level overall.”
Strong risk-on vibes in Europe
Risk-taking is still apparently the name of the game during today’s morning London session since the major European equity indices were just raking in gains like nobody’s business.
And like yesterday, market analysts are still pointing to easing fears of a trade war because of reports that China and the U.S. are negotiating in order to avoid a potential trade war.
- The pan-European FTSEurofirst 300 was up by 1.35% to 1,439.93
- Germany’s DAX was up by 1.82% to 12,001.53
- The blue-chip Euro Stoxx 50 was up by 1.65% to 3,328.15
U.S. equity futures also got a boost, which implies that the risk-on vibes may spillover into the upcoming U.S. session.
- S&P 500 futures were up by 0.55% to 2,674.00
- Nasdaq futures were up by 0.87% to 6,832.75
Major Market Mover(s):
The euro’s rally was already showing signs of fatigue early on. However, it wasn’t until Liikanen began speaking that buyers finally said “we give up” and caused the euro to slump hard against everything except the pound.
Other market analysts also blamed Liikanen’s cautious tone for the euro’s slide. Although they also mention the weaker rise in loans to non-financial businesses in the Euro Zone (+3.1% vs. +3.4% previous), since that supposedly raised doubts in the Euro Zone’s growth.
EUR/USD was down by 74 pips (-0.59%) to 1.2391, EUR/JPY was down by 42 pips (-0.32%) to 131.07, EUR/NZD was down by 55 pips (-0.32%) to 1.7055
The pound was THE worst-performing currency of the morning London session, which is rather wonky since there were no apparent catalysts.
Sure, the BOE’s FPC repeated their concerns about Brexit. However, the pound’s slump started over an hour before the minutes of the FPC meeting were released.
Anyhow, nobody honestly knows for sure why the pound dove off a cliff. But some market analysts blamed the pound’s slide on technicals and month-end flows.
Other market analysts, meanwhile, blamed the strong selling pressure on GBP/CHF, which dragged down the other GBP pairs, with news that British pharmaceutical company GlaxoSmithKline will buy Swiss pharmaceutical company Novartis’ stake in consumer health care being cited as the price catalyst.
GBP/USD was down by 92 pips (-0.65%) to 1.4092, GBP/JPY was down by 57 pips (-0.38%) to 149.05, GBP/NZD was down by 73 pips (-0.37%) to 1.9365
The Greenback staged a broad-based recovery during the morning London session. In fact, the Greenback was the top-performing currency of the morning London session.
There were no direct catalysts for the Greenback’s recovery, but short-covering is a possibility, especially after getting a beating yesterday.
USD/CHF was up by 51 pips (+0.55%) to 0.9491, USD/JPY was up by 27 pips (+0.26%) to 105.76, USD/CAD was up by 40 pips (+0.32%) to 1.2887
Watch Out For:
- 1:00 pm GMT: S&P Case-Shiller U.S. composite HPI (6.15% vs. 6.3% previous)
- 2:00 pm GMT: CB’s U.S. consumer confidence (131.0 vs. 130.8 previous)
- 2:00 pm GMT: Richmond Fed’s manufacturing index (23 expected vs. 28 previous)
- 3:00 pm GMT: Atlanta Fed President Raphael Bostic is scheduled to speak