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Greenback strength was still a major theme during the morning London session, despite the slide in U.S. bond yields.

The Greenback wasn’t the top dog of the session, though, since the yen was able to eke out a win, likely because of the slide in bond yields and risk-off vibes.

The European currencies (GBP, EUR, CHF), meanwhile, were getting swamped by sellers, with the euro getting the worst of it.

  • German final HICP m/m: unchanged at -0.1% as expected
  • German final HICP y/y: unchanged at 1.4% as expected
  • Euro Zone final HICP y/y: unchanged at 1.2% as expected
  • Euro Zone final core HICP y/y: unchanged at 0.7% as expected

Major Events/Reports:

Skittish risk sentiment in Europe

Risk sentiment in Europe was rather jittery during today’s morning London session.

The major European equity indices had a soft start, which market analysts attributed to lingering worries because of news related to North Korea earlier, as well as the dumping of Italian stocks because of the leaked draft of the 5 Star/League agreement from yesterday.

The major European equity indices later staged a broad-based recovery, seemingly as a reaction to a speaker from Italy’s League Party who denied the authenticity of the leaked draft, particularly the provisions on debt forgiveness.

However, selling pressure later returned and forced the major European equity indices back down again.

  • The pan-European FTSEurofirst 300 was down by 0.05% to 1,539.78
  • Germany’s DAX was still up by 0.09% to 12,982.00 but off the day’s high at 13,031.20
  • The blue-chip Euro Stoxx 50 was down by 0.36% to 3,551.65

Global bond yields fall

Global bond yields were broadly lower during the morning London session.

Aside from safe-haven demand for bonds, there’s really no clear reason why, though. And market analysts were only stating the obvious when they pointed out that bond yields slipped from their highs without any apparent catalysts.

  • German 10-year bond yield down by 3.57% to 0.621%
  • French 10-year bond yield down by 2.27% to 0.846%
  • U.K. 10-year bond yield down by 1.19% to 1.499%
  • U.S. 10-year bond yield down by 0.37% to 3.069%
  • Canadian 10-year bond yield down by 0.28% to 2.477%

Major Market Mover(s):

JPY

The yen was able to edge out a small win against the Greenback to claim the top spot… during this session at least.

And yen bulls can probably thank the slide in global bond yields and skittish risk sentiment in Europe for the yen’s strength.

USD/JPY was down by 4 pips (-0.03%) to 110.15, CHF/JPY was down by 22 pips (-0.20%) to 110.09, EUR/JPY was down by 64 pips (-0.49%) to 129.84

EUR

The euro had another bad run today and is also on course to closing out as the worst-performing currency of the day.

The euro got hammered across the board at around 8 am GMT. There were no direct, negative catalysts at the time, though.

Anyhow, market analysts are attributing the euro’s slide to Greenback strength and worries surrounding a leaked draft of the 5 Star/League agreement that was released by the Huffington Post during yesterday’s U.S. session since the draft includes plans to ask the ECB to forgive  €250 billion worth of Italian debt, as well as disconcerting plans to propose “economic and judicial procedures that allow member states to leave monetary union.”

Greenback strength sounds about right. Although it’s worth noting that the Greenback was actually mixed for the session since the yen was able to edge out a win against the Greenback while the Aussie was able to fight the Greenback to a standstill, with AUD/USD flat for the session.

Continued weakness because of the leaked draft also sounds about right since the euro has been sliding since the draft was released yesterday.

The rather strong selling pressure is still kinda strange, though.

EUR/USD was down by 57 pips (-0.48%) to 1.1784, EUR/CHF was down by 39 pips (-0.33%) to 1.1791, EUR/GBP was down by 27 pips (-0.31%) to 0.8739

CHF

The Swissy was the second weakest currency of the morning London session, despite the apparent prevalence of risk aversion in Europe.

The Swissy was likely tracking the euro’s slide since the two currencies have been moving in tandem recently. Although I can’t help but think that the SNB may have also been sneakily weakening the Swissy again.

USD/CHF was up by 17 pips (+0.18%) to 1.0006, AUD/CHF was up by 15 pips (+0.19%) to 0.7490, NZD/CHF was up by 11 pips (+0.15%) to 0.6885

GBP

The pound was barely won out against the Swissy and was the third weakest currency of the session.

There weren’t really any direct catalysts for the pound’s slide, but market analysts were attributing the pound’s weakness to the Greenback’s strength and lingering worries related to Brexit.

GBP/USD was down by 23 pips (-0.17%) to 1.3485, GBP/JPY was down by 30 pips (-0.21%) to 148.55, GBP/AUD was down by 33 pips (-0.18%) to 1.8017

Watch Out For:

  • 12:30 pm GMT: Canadian manufacturing sales (1.0% expected vs. 1.9% previous)
  • 12:30 pm GMT: U.S. building permits (1.35M expected, same as previous) and U.S. housing starts (1.31M expected, same as previous)
  • 12:30 pm GMT: Atlanta Fed President Raphael Bostic will speak
  • 1:15 pm GMT: U.S. industrial production (0.6% expected vs. 0.5% previous)
  • 1:15 pm GMT: U.S. capacity utilization rate (78.4% expected vs. 78.0% previous)
  • 1:30 pm GMT: CB’s U.K. leading index (-0.4% previous)
  • 2:30 pm GMT: U.S. crude oil inventories (-1.1M expected vs. -2.2M previous)
  • 4:00 pm GMT: BOC Deputy Governor Lawrence Schembri will speak
  • 4:00 pm GMT: SNB Chair Thomas Jordan has a speech