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The Greenback is the one currency to rule them all. However, the Swissy gave the Greenback a run for its money. The pound, meanwhile, was swamped by sellers across the board.

  • French flash manufacturing PMI: 53.4 as expected vs. 53.7 previous
  • French flash services PMI: 57.4 vs. 56.6 expected, 56.9 previous
  • German flash manufacturing PMI: 58.1 vs. 57.5 expected, 58.2 previous
  • German flash services PMI: 54.1 vs. steady at 53.9 expected
  • Euro Zone flash manufacturing PMI: 56.0 as expected vs. 56.6 previous
  • Euro Zone flash services PMI: 55.0 vs. 54.8 expected, 54.9 previous

Major Events/Reports:

John Williams speaks

San Francisco Fed President John Williams was interviewed by Spanish newspaper El Pais earlier.

Williams was asked about Trump’s tariffs and the risks of a trade war, and Williams answered as follows:

“A significant [trade] war would have very negative economic effects. The first would be the destruction of the supply chain, with a huge increase in costs for consumers and a drop in productivity. Inflation would also rebound, which would hit low-income consumers.”

However, Williams also added later that the risks associated with a trade war are “not as serious as some headlines suggest.”

Williams was also asked for some forward guidance on monetary policy and Williams said that:

“We withdraw stimuli gradually when the US grows, the unemployment rate is 4% and we approach the inflation target of 2%. It is a very good time to retrace the path of the past decade.”

“The first is that you have to communicate in advance, clearly and explaining the reasons. Communicate until people are tired of hearing your message. And the second is that you have to get out of this process very gradually, without sudden changes.”

Commodities clobbered

Commodities were broadly in decline during the morning London session, likely because of the Greenback’s persistent strength, which makes globally-traded commodities relatively more expensive to buy.

And for reference, the U.S. dollar index was up by 0.44% to 90.48 for the day whenn the session ended.

Most base metals were down.

  • Copper was down by 0.10% to $3.132 per pound
  • Nickel was down by 3.57% to $14,320.00 per dry metric ton

Oil benchmarks were also in negative territory.

  • U.S. WTI crude oil was down by 0.31% to $68.50 per barrel
  • Brent crude oil was down by 0.26% to $73.97 per barrel

And the same can be said of precious metals.

  • Gold was down by 0.60% to $1,330.30 per troy ounce
  • Silver was down by 1.24% to $16.950 per troy ounce

Risk-taking prevails

The major European equity indices had a mixed start and then proceeded to dip across the board, which is a sign of risk aversion.

However, they later found support and began to recover from the intial dip and then some. In fact, most of the major European equity indices were able to end the session on a high note, which points to the prevalence of risk appetite in Europe.

And market analysts say that the early bout of risk aversion was due to some disappointing earnings reports and higher U.S. bond yields. The rise in bond yields, in particular, supposedly dampened demand for divedend-paying, defensive stocks, which are otherwise know as “bond proxy” stocks.

As to what allowed risk appetite to prevail, it’s not clear yet. Although fading geopolitical tensions may have helped, especially news over the weekend that North Korea is playing nice and appears to be pushing forward with denuclearization.

  • The pan-European FTSEurofirst 300 was still down by 0.06% to 1,496.50 but is already off the day’s low at 1,491.59
  • Germany’s DAX was already up by 0.01% to 12,542.00
  • The blue-chip Euro Stoxx 50 already up by 0.16% to 3,497.45

Another sign that risk appetite was the more prevalent sentiment is the fact that U.S. equity futures were in the green.

  • S&P 500 futures were up by 0.10% to 2,674.25
  • Nasdaq futures were up by 0.23% to 6,691.75

Major Market Mover(s):

USD

The Greenback was the best-performing currency of the morning London session and is also the top-performing currency of the day (so far), despite a slightly cautious message from San Francisco Fed Head Williams.

There weren’t really any direct catalysts for the Greenback’s strength, but some market analysts say that we’re just seeing an extension of last week’s theme, namely that the Greenback is rising in tandem with higher U.S. bond yields since the Fed is expected to continue its hiking path.

USD/JPY was up by 33 pips (+0.31%) to 108.17, USD/CHF was up by 6 pips (+0.07%) to 0.9759, USD/CAD was up by 25 pips (+0.20%) to 1.2776

CHF

The Greenback may have been the top dog during the morning London session. However, the Swissy gave the Greenback a real challenge. In fact, the Greenback barely edged out a win against the Swissy.

The Swissy’s strength made sense at first when risk aversion initially prevailed. However, the Swissy continued to strengthen even as risk appetite made a comeback later.

Other than safe-haven demand for the Swissy ahead of the ECB statement, there’s no clear reason for the Swissy’s persistent strength, though.

NZD/CHF was down by 20 pips (-0.29%) to 0.7004, EUR/CHF was down by 30 pips (-0.25%) to 1.1939, AUD/CHF was down by 19 pips (-0.26%) to 0.7460

GBP

The pound got whupped across the board and was the worst-performing currency of the session.

There were no negative catalysts for the pound’s broad-based slide, but  some market analysts blamed the pound’s slide on growing doubts that the BOE is on track for a May rate hike after last week’s string of disappointing data and cautious comments from BOE Guv’nah Carney.

GBP/USD was down by 63 pips (-0.45%) to 1.3958, GBP/JPY was down by 21 pips (-0.14%) to 151.00, GBP/CHF was down by 53 pips (-0.39%) to 1.3621

Watch Out For:

  • 12:30 pm GMT: Canadian wholesale sales (0.8% expected vs. 0.1% previous)
  • 1:45 pm GMT: Markit’s U.S. manufacturing PMI (55.2 expected vs. 55.6 previous)
  • 1:45 pm GMT: Markit’s U.S. services PMI (54.3 expected vs. 54.0 previous)
  • 2:00 pm GMT: U.S. existing home sales (5.55M expected vs. 5.54M previous)
  • 2:30 pm GMT: CB’s Australian leading index (-0.1% previous)
  • 7:30 pm GMT: BOC Guv’nah Stephen Poloz and Deputy Guv’nah Carolyn Wilkins will testify before the House of Commons
  • 10:00 pm GMT: RBA Assistant Guv’nah Christopher Kent will speak