Heightened geopolitical risks over Syria and falling bond yields gave the yen a boost during the session. The pound, meanwhile, was hit by selling pressure after the U.K. released a bunch of mostly disappointing economic reports.
- French BOF business sentiment: 103.0 vs. steady at 105.0 expected
- Italian retail sales m/m: 0.4% vs. 0.3% expected, -0.5% previous
- U.K. industrial production m/m: 0.1% vs. 0.4% expected, 1.3% previous
- U.K. manufacturing production m/m: -0.2% vs. 0.2% expected, 0.0% previous
- Construction output in the U.K. m/m: -1.6% vs. 0.8% expected, -3.1% previous
- U.K. goods trade balance: -£10.2B vs. -£12.0B expected, -£12.2B previous
- U.S. CPI report coming up
- FOMC minutes later
Disappointing U.K. data
The U.K. released a bunch of economic reports during the session. And, well, the reports actually presented a mixed picture, but most of them happened to miss expectations, which is likely why GBP sellers won out.
Anyhow, first up is the U.K.’s Index of Production report, which revealed that industrial production only rose by 0.1% month-on-month in February, missing expectations for 0.4% rise and slowing drastically from the previous month’s +1.3% rise.
The poor reading was due largely to the 0.2% decline in manufacturing production (+0.2% expected), which is the first negative reading since March 2017.
Year-on-year, total industrial production expanded by 2.2%, missing expectations for an annual growth of 2.9%. But on a more upbeat note, this is faster than January’s downwardly revised annual reading of +1.2% (+1.6% originally).
Next, construction output in the U.K. plunged by 1.6% month-on-month in February, which is rather disappointing since the consensus was that it would bounce back by 0.8%. And the 9.4% drop in infrastructure spending was apparently the main drag on total construction output.
Finally, the U.K.’s February trade report, showed that the U.K.’s trade gap narrowed from £12.2 billion to £10.2B, which is better than the consensus that the trade deficit will only fall slightly lower to £12.0 billion.
The market is already jittery because of heightened geopolitical tensions over Syria and it probably doesn’t help that Trump woke up early to tweet this:
Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!” You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!
— Donald J. Trump (@realDonaldTrump) April 11, 2018
Risk aversion stikes back
Risk aversion made a comeback during today’s morning London session, causing the major European quity indices to reel in pain.
And according to market analysts, the returning risk-off vibes were due to heightened geopolitical tensions between the U.S. and Russia over Syria, given that the U.S. is firing up the war rhetoric against the Assad government’s supposed chemical attack in Damascus.
- The pan-European FTSEurofirst 300 was down by 0.70% to 1,474.04
- Germany’s DAX was down by 0.92% to 12,283.41
- The blue-chip Euro Stoxx 50 was down by 0.66% to 3,416.65
U.S. equity futures were also down, so the risk-off vibes may potentially carry over into the upcoming U.S. session.
- S&P 500 futures were down by 0.84% to 2,632.75
- Nasdaq futures were down by 0.82% to 6,569.75
Major Market Mover(s):
The pound encountered broad-based selling pressure after the U.K. released a bunch of mostly disappointing economic reports.
GBP/USD was down by 41 pips (-0.29%) to 1.4164, GBP/NZD was down by 74 pips (-0.37%) to 1.9238, GBP/JPY was down by 73 pips (-0.48%) to 151.35
The yen was the best-performing currency of the morning London session. And yen bulls can likely thank the slide in global bond yields and returning risk-off vibes for that.
USD/JPY was down by 21 pips (-0.20%) to 106.83, CAD/JPY was down by 24 pips (-0.28%) to 84.66, EUR/JPY was down by 26 pips (-0.20%) to 132.22
Watch Out For:
- 12:30 pm GMT: Headline (0.0% expected vs. 0.2% previous) and core (0.2% expected, same as previous) readings for U.S. CPI
- 2:30 pm GMT: U.S. crude oil inventories (-0.6M expected vs. -4.6M previous)
- 6:00 pm GMT: The FOMC’s meeting minutes will be released
- 6:00 pm GMT: U.S. Federal budget balance (-$191.0B expected vs. -$215.2B previous)