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There wasn’t much on the docket for today’s morning London session. Even so, a few themes were clearly playing out. And the most notable ones are the extension of the pound’s broad-based recovery and the Greenback’s retreat.

  • Spanish HICP m/m: 0.8% as expected vs. 1.2% previous
  • Spanish HICP y/y: steady at 1.1% as expected
  • Chinese new yuan loans: 1,180B vs. 1,100B expected, 1,120B previous
  • Canada’s jobs report coming up
  • Central bankers will be speaking later

Major Events/Reports:

An Italian government by Sunday?

According to an unnamed Five Star Movement source that was cited in a Reuters report,  members of the Five Star Movement and the League party are currently in talks and are expected to form a coalition government and name a prime minister by Sunday.

Other than that, the unnamed source also said that “The government will be rational and reasonable (with the public accounts).”

Downbeat day in Europe

Europe is apparently ending the trading week on a downbeat note since the major European equity indices were mostly in the red after opening mostly higher earlier.

Market analysts attributed the risk-friendly vibes from earlier on higher demand for certain shares because of deal-making activity.

As for the later signs of risk aversion, there’s no clear reason for that yet. However, Italian banks were on the back foot earlier, likely because of political uncertainty in Italy. And it’s possible that Italy’s political troubles may have soured overall risk sentiment.

Another possible reason is lingering worries related to uncertainty surrounding Trump’s announcement that he’s pulling out of the Iran Deal.

  • The pan-European FTSEurofirst 300 was down by 0.12% to 1,535.69
  • Germany’s DAX was still up by 0.37% to 12,974.31
  • The blue-chip Euro Stoxx 50 was down by 0.33% to 3,557.25

U.S. bond yields fall

Global bond yields were mixed during the morning London session. However, U.S. bond yields were broadly in retreat.

U.S. bond yields have been falling since the benchmark 10-year yields breached the 3.0% mark on Wednesday.

And the slide in U.S. bond yields only ramped up after U.S. CPI failed to impress yesterday.

There were no fresh catalysts for the slide in U.S. bond yields today, but it’s quite likely that we’re just seeing a continuation of the recent themes

  • U.S. 30-year bond yield down by 0.57% to 3.103%
  • U.S. 10-year bond yield down by 0.42% to 2.959%
  • U.S. 5-year bond yield down by 0.24% to 2.826%
  • U.S. 2-year bond yield down by 0.12% to 2.535%

Major Market Mover(s):

GBP

The pound was the top-performing currency of the morning London session (and of the day for that matter).

If y’all can still recall, the pound dove off a cliff when the BOE failed to provide any hawkish surprises during yesterday’s BOE statement.

However, the pound later found support during Thursday’s U.S. session, when BOE Guv’nah Carney was interviewd by the BBC since Carney apparently revived rate hike expectations when he said that:

“It’s likely over the course of the next year rates will go up… that’s the most likely thing to happen.”

And since there were no fresh, positive catalysts for the pound today, it’s likely that the pound’s rally during the session was just an extension of its  post-BOE recovery.

GBP/USD was up by 55 pips (+0.41%) to 1.3567, GBP/JPY was up by 53 pips (+0.36%) to 148.28, GBP/NZD was up by 47 pips (+0.24%) to 1.9440

USD

The Greenback is the mirror-image of the pound since the Greenback was the worst-performing currency of the session and is also the weakest currency of the day (so far).

There were no apparent catalysts for the Greenback’s weakness, but it’s possible that traders are still reeling from yesterday’s U.S. CPI miss. It’s also possible that the Greenback may have been dragged lower by the ongoing slide in U.S. bond yields.

USD/JPY was down by 9 pips (-0.08%) to 109.27, USD/CHF was down by 39 pips (-0.39%) to 0.9998, USD/CAD was down by 32 pips (-0.25%) to 1.732

Watch Out For:

  • 12:30 pm GMT: Canada’s jobless rate (steady at 5.8% expected) and employment change (17.8K expected, 32.3K previous)
  • 12:30 pm GMT: U.S. import prices (0.5% expected, 0.0% previous)
  • 1:10 pm GMT: BOC Senior Deputy Guv’nah Carolyn Wilkins will speak in a panel discussion
  • 1:15 pm GMT: ECB Overlord Draghi is expected to give a speech
  • 2:00 pm GMT: University of Michigan’s U.S. consumer sentiment index (98.4 expected vs. 98.8 previous)