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Today’s morning London session was rather hectic with plenty of economic reports, central bank speakers, and even a historical event for the two Koreas.

In the forex market, however, the spotlight was on the pound since the pound got a massive pounding after the U.K.’s GDP report failed to meet expectations.

As for other currencies of note, we have the Aussie and the Kiwi, which apparently benefited from the risk-friendly vibes in Europe.

  • French flash GDP q/q: 0.3% vs. 0.4% expected, 0.7% previous
  • German import prices m/m: 0.0% vs. 0.1% expected, -0.6% previous
  • Nationwide U.K. HPI m/m: 0.2% as expected vs. -0.2% previous
  • French consumer spending m/m: 0.1% vs. 0.4% expected, 2.5% previous
  • French preliminary HICP y/y: 1.8% vs. 1.7% previous
  • Spanish flash HICP y/y: 1.1% vs. 1.2% expected, 1.3% previous
  • Spanish flash GDP q/q: 0.7% as expected, same as previous
  • German unemployment change: -7K vs. -15K expected, -18K previous
  • U.K. preliminary GDP q/q: 0.1% vs. 0.3% expected, 0.4% previous
  • U.K. preliminary GDP y/y: 1.2% vs. steady at 1.4% expected
  • Euro Zone consumer confidence: 0.4 vs. -0.1 expected, 0.4 previous
  • Euro Zone business climate: 1.35 vs. 1.27 expected, 1.44 previous

Major Events/Reports:

U.K. Q1 GDP disappoints

The preliminary estimates for the U.K.’s Q1 2018 GDP growth were released earlier today.

And sadly for pound bulls, the U.K.’s economy only barely grew by 0.1% quarter-on-quarter, missing expectations for a 0.3% quarterly expansion.

This is the weakest reading since Q4 2012 and marks the second quarter of slower quarterly growth to boot.

More importantly for rate hike expectations, the weak +0.1% reading is much slower than the BOE’s forecast that GDP grew by 0.4% in Q1, as laid out in the BOE’s February Inflation Report.

The miss therefore likely helped to dampen expectations for a May BOE rate hike, resulting in the pound’s hard drop.

Getting back on topic, the U.K.’s GDP only grew by 1.2% year-on-year, contrary to expectations that GDP will maintain the +1.4% pace.

This is the weakest annual expansion since Q2 2012 and marks the fourth consecutive quarter of ever slowing annual GDP growth.

Oh, do note that this is the preliminary reading, so only the output approach is used to estimate GDP.

Having said that, the details of the GDP report showed 5 of the 10 major industry groups printed weaker output or even negative output, with the 3.3% slump in construction output being the main drag (+2.2% previous), followed by the weaker 2.5% increase in manufacturing output (+2.9% previous).

As for the other industry groups, 4 reported stronger output while 1 (business services) maintained the rate of output.

BOJ Shogun Kuroda speaks

BOJ Shogun Haruhiko Kuroda gave a presser earlier. And while the BOJ’s timeline for hitting the 2.0% inflation was apparently scrapped during the BOJ statement earlier, Kuroda clarified that:

“There’s no change to our view, formed three months ago, that inflation will likely reach 2 percent during fiscal 2019.”

And when Kuroda was asked to explain why the BOJ decided to remove the timeframe for hitting the inflation target, Kuroda responded by saying that:

“The timeframe was always a forecast, not a binding deadline for meeting our goal. But some market players interpreted the timeframe was a deadline and tied it with monetary policy action.”

“In reality, it’s taking time to achieve 2 percent inflation and there are various uncertainties to the price outlook. It’s inappropriate for markets to focus too much on the timeframe.

“If the economy loses momentum for achieving 2 percent inflation, we’ll undoubtedly consider easing policy … We removed the timeframe to arrest market misunderstanding that the timeframe is directly linked to monetary policy.”

Other than that, Kuroda also expressed some concern about underlying inflation in Japan when he said that:

“Companies’ wage and price-setting behavior remains cautious. When stripping away the effect of energy price moves, inflation remains on a weak note despite the economy’s expansion and the narrowing output gap.”

SNB Boss-Man Jordan speaks

SNB Head Thomas Jordan gave a speech before the shareholders of the SNB earlier today.

And Jordan said that “the Swiss franc [has] weakened since the second half of 2017,” which means that “There has thus been a reduction in the significant overvaluation” of the Swissy.

However, Jordan repeated the SNB’s mantra that the Swissy “remains highly valued.”

And since the Swissy is still “highly valued” and since “Inflation remains low and inflationary pressure modest,” Jordan reaffirmed the SNB’s promise (or threat) “to intervene in the foreign exchange market as necessary” (*cough* currency manipulator *cough*).

And to drive home the point that the SNB’s monetary policy ain’t budging anytime soon, Jordan also warned that:

“Tightening monetary conditions would be premature at this juncture, and would risk unnecessarily jeopardising the positive economic momentum that has been established.”

The two Koreas make peace (maybe)

Word hit the wires earlier that Kim Jong Un of North and South Korean President Moon Jae-in have had a meeting of the minds. They then procceded to give the following joint statement:

“The two leaders declare before our people of 80 million and the entire world there will be no more war on the Korean peninsula and a new age of peace has begun”

The declaration include promises to pursue the “complete denuclearisation of the Korean peninsula,” arms reduction, and to turn the DMZ into a “peace zone” among others.

Let’s just hope everything works out for both Koreas.

Trump, of course, quickly tweeted the following after the declaration.

And whether you like Trump or despise him with you entire being, you have to give credit where credit is due.

South Korean foreign minister Kang Kyung-wha credits Trump at least.

Some risk-taking to end the week

Europe is apparently ending the week on a hopeful note since the major European equity indices were broadly in the green during today’s morning London session.

And market analysts say that the risk-friendly vibes were due to a recovery in the tech sector and higher demand for banking shares after Spanish banks released positive earnings reports.

Other than that, the peace declaration between the two Koreas also likely helped to ease geopolitical tensions, improving overall risk sentiment.

  • The pan-European FTSEurofirst 300 was up by 0.13% to 1,507.16
  • Germany’s DAX was up by 0.81% to 12,601.58
  • The blue-chip Euro Stoxx 50 up by 0.31% to 3,517.85

Global bond yields ease

Global bond yields were down in the dumps during today’s morning London session, with European bond yields suffering the most.

And according to market analysts, European bond yields were down because of ECB Overlord Draghi’s cautious tone during yesterday’s ECB presser.

  • German 10-year bond yield down by 2.87% to 0.576%
  • French 10-year bond yield down by 1.31% to 0.806%
  • U.K. 10-year bond yield down by 3.12% to 1.459%
  • U.S. 10-year bond yield down by 0.67% to 2.970%
  • Canadian 10-year bond yield down by 0.02% to 2.351%

Major Market Mover(s):


The pound got a very severe beatdown after the U.K.’s GDP report was released, very likely because the report also missed the BOE’s expectations, which then likely dampened expectations for a May BOE rate hike.

GBP/USD was down by 159 pips (-1.15%) to 1.3757, GBP/AUD was down by 228 pips (-1.24%) to 1.8216, GBP/NZD was down by 233 pips (-1.19%) to 1.9504


The Aussie and the Kiwi were the top-performing currencies of the morning London session, likely because of the risk-on vibes in Europe. Although it’s also possible that we’re just seeing some short-covering. After all, the Aussie and the Kiwi were two of the main losers this week, with the Kiwi being THE biggest loser of the week (so far).

NZD/USD was up by 8 pips (+0.11%) to 0.7053, NZD/CHF was up by 8 pips (+0.12%) to 0.6994, NZD/JPY was up by 5 pips (+0.06%) to 77.11

AUD/USD was up by 9 pips (+0.11%) to 0.7552, AUD/CHF was up by 13 pips (+0.17%) to 0.7488, AUD/JPY was up by 9 pips (+0.11%) to 82.57

Watch Out For:

  • 12:30 pm GMT: U.S. advance GDP growth (2.0% expected vs. 2.9% previous) and GDP price index (2.2% expected vs. 2.3% previous); read Forex Gump’s Event Preview
  • 2:00 pm GMT: BOE Guv’nah Carney will speak
  • 2:00 pm GMT: Revised University of Michigan consumer sentiment (98.0 expected vs. 97.8 previous)