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Falling bond yields and risk aversion aplenty allowed the yen to dominate its peers. The U.K.’s disappointing PMI report, meanwhile, apparently enticed pound bears to come charging in.

The Loonie is also worth noting since it was the second weakest currency after the pound, likely because of the drop in oil prices.

  • Italy’s jobless rate: 10.9% vs. 11.0% expected, 11.1% previous
  • U.K. construction PMI: 47.0 vs. 50.9 expected, 51.4 previous
  • Euro Zone flash HICP y/y: 1.4% as expected vs. 1.1% previous
  • Euro Zone flash core HICP y/y: 1.0% vs. 1.1% expected, 1.0% previous
  • Jobless rate in the Euro Zone: 8.5% as expected vs. 8.6% previous

Major Events/Reports:

U.K. construction PMI

Markit released the U.K.’s latest construction PMI report earlier. And, quite unfortunately, the headline reading slumped hard from 51.4 to 47.0 in March.

The reading is below the 50.0 neutral level, which means that the construction sector is contracting. And to add to that, this is the first reading below the 50.0 level in six months.

Markit gave its report a positive spin when it noted that “firms anticipate a rebound in activity during the months ahead” because “survey respondents noted that unusually bad weather conditions had been a key factor behind the drop in construction output.”

At any rate, all sub-sectors were down in the dumps, with residential construction, civil engineering workds, and commercial building construction all reporting lower activity and new orders.

In fact, the “latest deterioration in new order books was the sharpest since July 2016.”

On a happier note, employment growth rose “to a three-month high” in March.

In addition, the construction sector seems to be helping when it comes to inflationary pressure since survey respondents reported the “strongest rise in their average prices charged since September 2017.”

Let slip the dogs of (trade) war

The U.S. and China are apparently opting to escalate this trade war business.

Yesterday, Trump announced planned tariffs on 1,300 Chinese goods to the tune of $50 billion. And earlier today, China returned fire by slapping tariffs on 106 U.S. goods, including soy beans, cars, and aircraft.

Oh, China’s planned tariffs also amount to the tune of $50 billion. No effective date has been announced yet, though.

Trump, of course, was up early and tweeted the following:

Euro Zone HICP

The flash estimate for the Euro Zone’s March HICP came in at 1.4% year-on-year, which is within expectations and a faster rate of annual increase compared to the previous 1.1% rise.

More importantly, it’s meeting the ECB’s forecast that headline HICP will rise by 1.4%, as detailed in the ECB’s March 2018 Eurosystem staff macroeconomic projections.

Moreover, HICP less energy, one of the ECB’s preferred measures for core inflation, accelerated from 1.0% to 1.3% year-on-year. This is already beating the ECB’s 2018 forecast of +1.2%.

As for HICP less energy and unprocessed food, another of the ECB’s preferred measures for core inflation, that came in at 1.3% (+1.2% previous). This is beating the ECB’s 2018 forecast of +1.1%.

Precious metals rise as other commodities plunge

Commodities got a severe beat-down during the morning London session. Not all commodities were feeling the pain, though, since precious metals were doing just fine. And this was likely due to safe-haven flows due to the intense risk-off vibes. After all, precious metals are considered to be traditional safe-haven assets.

As to why the other commodities were getting dumped, market analysts quite naturally blamed on the trade tensions between the U.S. and China.

Oil benchmarks were dumped hard.

  • U.S. WTI crude oil was down by 1.78% to $62.38 per barrel
  • Brent crude oil was down by 1.73% to $66.94 per barrel

Base metals were dumped REALLY hard.

  • Copper was down by 2.43% to $2.989 per pound
  • Nickel was down by 3.19% to $13,065.00 per dry metric ton

As mentioned earlier, precious metals were doing A-okay.

  • Gold was up by 0.73% to $1,347.00 per troy ounce
  • Silver was up by 0.23% to $16.430 per troy ounce

Intense risk-off vibes in Europe

The risk-off vibes just won’t go away. In fact, risk aversion even intensified, sending the major European equity indices reeling in pain.

And, in keeping with the recent themese, market analysts blamed the feelings of doom and gloom on the escalating trade dispute between the U.S. and China.

  • The pan-European FTSEurofirst 300 was down by 1.12% to 1,429.67
  • Germany’s DAX was down by 1.50% to 11,823.00
  • The blue-chip Euro Stoxx 50 was down by 1.31% to 3,308.05

Unlike yesterday, U.S. equity futures were also feeling the pain.

  • S&P 500 futures were down by 1.72% to 2,568.25
  • Nasdaq futures were down by 2.04% to 6,337.25

Global bond yields drop

Another sign of the intense risk-off vibes was the strong safe-haven demand for bonds, which dragged global bond yields lower.

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 2.79% to 0.488%
  • French 10-year bond yield up by 2.70% to 0.717%
  • U.K. 10-year bond yield up by 1.55% to 1.338%
  • U.S. 10-year bond yield up by 0.93% to 2.757%
  • Canadian 10-year bond yield up by 1.16% to 2.123%

Major Market Mover(s):


Falling bond yields and intense risk aversion meant a double boost for the safe-haven yen that pushed the yen to the top of the ranking table, not just of the session, but of the entire day (so far) as well.

USD/JPY was down by 47 pips (-0.45%) to 106.17, EUR/JPY was down by 36 pips (-0.28%) to 130.46, CHF/JPY was down by 45 pips (-0.41%) to 110.77


The pound is the worst-performing currency of the session. And the pound’s broad-based slide began shortly after the U.K.’s construction PMI report failed to meet expectations, so the poor PMI report was apparently the catalyst.

GBP/USD was down by 28 pips (-0.20%) to 1.4039, GBP/CHF was down by 32 pips (-0.23%) to 1.3455, GBP/JPY was down by 98 pips (-0.66%) to 149.04


The Loonie was the second worst-performing currency after the pound. There were no NAFTA-related reports, so the Loonie was likely dragged lower by the drop in oil prices.

USD/CAD was up by 38 pips (+0.30%) to 1.2830, EUR/CAD was up by 76 pips (+0.49%) to 1.5766, AUD/CAD was up by 15 pips (+0.16%) to 0.9855

Watch Out For:

  • 12:15 pm GMT: ADP’s U.S. non-farm employment report (200.0K expected vs. 235K previous)
  • 1:45 pm GMT: Markit’s final U.S. services PMI (54.3 expected vs. 54.1 previous)
  • 2:00 pm GMT: U.S. factory orders (1.7% expected, -1.4% previous)
  • 2:00 pm GMT: ISM’s U.S. non-manufacturing PMI (59.0 vs. 59.5 previous)
  • 2:30 pm GMT: U.S. crude oil inventories (1.4M expected vs. 1.6M previous)
  • 3:00 pm GMT: Cleveland Fed President Loretta Mester will speak