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Price action was rather choppy during today’s morning London session. Even so, the higher-yielding Kiwi was able to edge out a victory against its peers, likely because of the risk-on vibes.

Meanwhile, the pound tossed and turned after the U.K.’s services PMI was released. However, sellers ultimately prevailed and so the pound ended up at bottom of the forex heap (for this session at least).

  • German factory orders m/m: 0.3% vs. 1.5% expected, -3.5% previous
  • Swiss CPI m/m: 0.4% vs. 0.2% expected, 0.4% previous
  • Spanish services PMI: 56.2 as expected vs. 57.3 previous
  • Italian services PMI: 52.6 vs .53.9 expected, 57.3 previous
  • French final services PMI: 56.9 vs. no change from 56.8 previous
  • German final services PMI: 53.9 vs. no change from 54.2 previous
  • Euro Zone final services PMI: 54.9 vs. no change from 55.0 previous
  • U.K. services PMI: 51.7 vs. 54.0 expected, 54.5 previous
  • Euro Zone PPI m/m: 0.1% vs. 0.0% expected, 0.4% previous
  • Euro Zone retail sales m/m: 0.1% vs. 0.6% expected, -0.1% previous

Major Events/Reports:

U.K. services PMI

Markit’s U.K.’s services PMI report revealed that the headline reading dropped from 54.5 to 51.7 during the March period.

This is a much harder drop than the expected tumble to 54.0. Moreover, the March reading happens to be a 20-month low.

Like it’s construction PMI report, Markit tried to give its report a positive spin when it pointed out that “survey respondents noted that snow disruption and unusually bad weather conditions in March had been a key factor holding back business activity growth.”

In other words, the slowdown is only temporary and once weather conditions improve, then so will business activity growth.

Still, the details were rather dreary. New business growth, for instance, rose at “the weakest seen for 20 months.”

And aside from poor weather, “survey respondents often cited subdued consumer demand, while there were also some reports that Brexit-related uncertainty had led to delayed decision-making and risk aversion among clients.”

Employment growth also disappointed since payroll number grew at the slowest pace so far this year.

On a more optimistic note for inflation (and rate hike junkies), “Service providers recorded another sharp rise in their average cost burdens during March, with the rate of inflation the strongest seen for three months.”

Even better, “Average prices charged also increased at a robust pace across the service economy, with the latest rise the fastest since December 2017.”

Also, the rise in input costs was partially “attributed to greater staff salaries.” Although “rising utility bills and increased raw material costs (particularly food and drink)” also helped to drive input prices higher. Even so, it’s good to know that wage growth picked up the pace.

Intense risk-on vibes in Europe

After yesterday’s intense risk-off vibes, Europe was blessed with a bout of intense risk-taking that propelled the major European equity indices broadly higher.

And market analysts say that the risk-on vibes were due to easing trade war fears, supposedly because investors are betting that the U.S. and China will try to sit down and reason together in order to avoid a full-blown trade war.

  • The pan-European FTSEurofirst 300 was up by 1.55% to 1,461.60
  • Germany’s DAX was up by 1.77% to 12,169.39
  • The blue-chip Euro Stoxx 50 was up by 1.82% to 3,401.05

U.S. equity futures were also in positive territory, so the risk-friendly environment will likely carry over into the upcoming U.S. session.

  • S&P 500 futures were up by 0.36% to 2,656.50
  • Nasdaq futures were up by 0.52% to 6,616.75

Major Market Mover(s):

NZD

The higher-yielding Kiwi was the best-performing currency of the morning London session. That’s not really saying a lot, though, since the Kiwi’s gains against its peers were rather modest.

Anyhow, the risk-on vibes likely helped to keep the higher-yielding Kiwi supported. However, the Kiwi only ended up being a net winner because of late buyers. No clear reason for the late Kiwi demand, though.

NZD/USD was up by 4 pips (+0.06%) to 0.7290, NZD/CHF was up by 6 pips (+0.09%) to 0.7016, NZD/CAD was up by 11 pips (+0.12%) to 0.9315

GBP

The pound was slapped lower when the U.K.’s latest services PMI reading failed to meet expectations.

However, bears later charged in and tried to push the pound higher. There was no apparent catalysts, but it’s likely that some rate hike junkies were happy to find out that wage growth picked up in the services sector, contributing to higher input prices and higher CPI down the road.

Sellers kept fighting back, though, and even eventually won out. And as a result, the pound ended up at the bottom of the forex heap (for this session at least).

GBP/USD was down by 24 pips (-0.18%) to 1.4028, GBP/CHF was down by 16 pips (-0.12%) to 1.3401, GBP/NZD was down by 35 pips (-0.18%) to 1.9242

Watch Out For:

  • 12:30 pm GMT: Canada’s trade balance (-$2.1B expected vs. -$1.9B previous)
  • 12:30 pm GMT: U.S. trade balance (-$56.8B expected vs. -$56.6B previous)
  • 12:30 pm GMT: U.S. initial jobless claims (225K expected vs. 215K previous)
  • 4:00 pm GMT: SNB Governing Board Member Andrea Maechler will speak
  • 5:00 pm GMT: Atlanta Fed President Raphael Bostic will speak