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There were plenty of themes that were playing out during the morning London session. And the ones that really stood out was the Loonie’s domination, the Greenback’s broad-based recovery, and the Swissy’s poor performance.

Other than those, the pound’s mixed performance despite the better-than-expected manufacturing PMI reading is also worth highlighting.

  • German retail sales m/m: -0.7% vs. 0.8% expected, -0.3% previous
  • Australian commodity prices y/y: -2.1% vs. -2.8% previous
  • Swiss retail sales y/y: -0.2% vs. -0.7% expected, -0.4% previous
  • Swiss manufacturing PMI: 60.3 vs. 64.3 expected, 65.5 previous
  • Spanish manufacturing PMI: 54.8 vs. 54.7 expected, 56.0 previous
  • Italian manufacturing PMI: 55.1 vs. 55.6 expected, 56.8 previous
  • French final manufacturing PMI: 53.7 vs. no change from 53.6 expected
  • German final manufacturing PMI: 58.2 vs. no change from 58.4 expected
  • Euro Zone final manufacturing PMI: unchanged at 56.6 as expected
  • U.K. manufacturing PMI: 55.1 vs. 54.7 expected, 55.0 previous

Major Events/Reports:

U.K. manufacturing PMI

It’s a brand new month, which means a fresh batch of PMI reports from Markit.

And today, we got our hands on the U.K.’s March manufacturing PMI report, which revealed that the U.K.’s headline manufacturing PMI reading improved slightly from 55.0 to 55.1, soundly beating the consensus that the reading will slump to 54.7.

However, commentary from Markit noted that the slightly improved reading was driven mainly by higher output growth, which was partially offset by “slower increases in both new orders and employment.”

In fact, employment growth was “the slowest pace during the year-so-far,” according to Markit. New orders growth, meanwhile, slowed to a nine-month low.

Moreover, Markit also sounded downbeat when it highlighted that “The average reading over the opening quarter as a whole (55.1) was the weakest in a year.”

More importantly for rate hike expectations, Markit noted that:

“Price pressures moderated in March, rates of increase in input costs and output charges both decelerating.”

Heck, Markit even pointed out that “purchase prices rose to the weakest extent in the year-to-date.” And those are bad signs for CPI (and rate hike expectations) down the road.

Risk-off day in Europe

The major European equity indices were hit by a wave of selling pressure during the morning London session, which implies that risk aversion was the dominant sentiment.

And as usual, market analysts were quick to blame renewed trade war fears between the U.S. and China as well as concerns for the tech sector.

  • The pan-European FTSEurofirst 300 was down by 0.50% to 1,445.41
  • Germany’s DAX was down by 0.89% to 11,988.48
  • The blue-chip Euro Stoxx 50 was down by 0.48% to 3,345.25

Will risk sentiment recover later?

Despite the gloomy vibes in Europe, U.S. equity futures were actually in positive territory, which implies that risk sentiment is recovering or will recover later in the U.S. session.

And market analysts say that U.S. equity futures were on the rise because of rejuvenated demand for tech stocks, likely becuase of bargain buying after the recent selloff.

  • S&P 500 futures were up by 0.69% to 2,592.75
  • Nasdaq futures were up by 0.97% to 6,455.00

Major Market Mover(s):

CAD

The Loonie was the best-performing currency of the morning London session and is also poised to overtake the Kiwi as the top-performing currency of the day.

There weren’t really any apparent catalysts, though. No NAFTA-related news. And looking at Trump’s tweets, he was mainly gloating about his 50% approval rating and referring to CNN as fake news.

There was this interesting somewhat NAFTA-related tweet, though.

Other than that, oil was on the up and up, and it’s likely that the Loonie was taking directional cues from the rise in oil prices.

USD/CAD was down by 10 pips (-0.08%) to 1.2872, AUD/CAD was down by 28 pips (-0.28%) to 0.9892, GBP/CAD was down by 33 pips (-0.20%) to 1.8085

USD

The Greenback was the second best-performing currency of the session. Like the Loonie, there were no apparent catalysts for the Greenback’s strength. And market analysts were only stating the obvious when they noted that the Greenback just shrugged off the renewed trade war fears.

EUR/USD was down by 21 pips (-0.17%) to 1.2301, AUD/USD was down by 21 pips (-0.27%) to 0.7683, NZD/USD was down by 15 pips (-0.21%) to 0.7245

CHF

The Swissy was the worst-performing currency of the session, which is kinda strange since risk aversion was the dominant sentiment in Europe. It’s possible, though, that traders were making preemptive moves ahead of the U.S. session, given that there were signs that risk sentiment was improving.

USD/CHF was up by 27 pips (+0.28%) to 0.9565, EUR/CHF was up by 13 pips (+0.11%) to 1.1767, CAD/CHF was up by 22 pips (+0.30%) to 0.7430

GBP

The pound actually had a mixed performance, but it’s worth highlighting since price action on the pound was roughly uniform.

To be more specific, the pound was bid higher ahead of and shortly after the release of the better-than-expected PMI reading.

However, sellers later launched an offensive, sending the pound reeling in pain. There was no clear reason why, but profit-taking and/or disappointment over the negative details of the PMI is a possible reason.

Anyhow, buyers were waiting, thereby limiting the pound’s losses and causing the pound to close out the session on a mixed note.

GBP/USD was down by 24 pips (-0.17%) to 1.4048 with 1.4021 as session low, GBP/JPY was down by 7 pips (-0.05%) to 149.26 with 148.88 as session low, GBP/CHF was up by 14 pips (+0.11%) to 1.3437 with 1.3413 as session low

Watch Out For:

  • 8:30 pm GMT: Federal Reserve Governor Lael Brainard will speak later
  • Dairy auction currently underway (-1.2% previous); auction usually ends at around 2:00 pm GMT