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The pound got hit by a wave of sellers after the U.K. released a bunch of disappointing economic reports. The Greenback, meanwhile, got bid higher across the board and was the top currency of the session.

Other than those two, the Loonie and the euro are also both noteworthy since the former extended its losses and was the second biggest loser of the session. The latter, meanwhile, was also a net loser after being the best-performing currency of the earlier Asian session.

  • Italian industrial production m/m: -1.2% vs. -0.7% expected, 1.2% previous
  • U.K. industrial production m/m: -0.8% vs. 0.1% expected, same as previous
  • U.K. manufacturing production m/m: -1.4% vs. 0.3% expected, -0.1% previous
  • Construction output in the U.K. m/m: 0.5% vs. 2.4% expected, -2.3% previous
  • U.K. goods trade balance: -£14.0B vs. -£11.5B expected, -£12.0B previous

Major Events/Reports:

Disappointing U.K. data

The Office for National Statistics (ONS) released a bunch of economic of report during the session. And unfortunately (for GBP bulls), all of them were rather disappointing.

First up is the U.K.’s Index of Production report, which revealed that total industrial production in the U.K. contracted by 0.8% month-on-month in April, missing expectations for 0.1% rise.

The poor reading was due largely to the painful 1.4% plunge in manufacturing production (+0.3% expected), which also marks the third straight month of negative readings.

Year-on-year, total industrial production expanded only by 1.8%, which is much slower than the expected 2.7% annual increase.

The reading is also a drastic slowdown from March’s +2.9% and put an end to three months of ever stronger annual readings.

Moving on, the next economic report is the U.K.’s construction output report. And that showed that total construction output only increased by 0.5% month-on-month in April, missing the +2.4% consensus by a very wide margin.

On a more upbeat note, however, the 0.5% rise does put an end to three consecutive months of falling construction output.

The final report is the U.K.’s April trade report. And that showed that the U.K.’s trade gap widened from £7.8 billion to £9.7 billion, thanks to the goods trade deficit ballooning from £12.0 billion to £14.0 billion instead of shrinking to £11.5 billion as expected.

Altmaier spricht

Peter Altmaier, Germany’s Economy Minister, was speaking at a radio interview earlier. And he had these to say about the trade spat between the U.S. and E.U. (as cited in a Reuters report)”

“I believe a win-win situation is still possible.”

“At the moment, however, it seems that no solution is in sight, at least not in the short term… We have not made any progress in the last few days, but rather, as we saw with the rejection of the summit declaration, we have gone backwards”

“We are ready to talk about trade imbalances. But we think it has to be done among friends and partners and not in mutual confrontation.”

“The American economy is dependent in many areas on the import of European goods. As tariffs increase, so does the cost of production in the United States.”

Risk-friendly start in Europe

The major European equity indices had a mixed start but it soon became apparent that risk-taking was the name of the game since most of the major European equity indices were flashing gamma green by the end of the morning London session.

And according to market analysts, the risk-on vibes were due to strong demand for banking shares, which helped to lift overall risk sentiment.

And banks shares got boosted, in turn, because of freshly-minted Italian Economy Minister Giovanni Tria’s comment on Sunday that:

“Our goal is (to lift) growth and employment. But we do not plan on reviving growth through deficit spending.”

“The position of the government is clear and unanimous. There is no question of leaving the euro.”

“The government is determined to prevent in any way the market conditions that would lead to an exit materializing. It’s not just that we do not want to leave, we will act in such a way that the conditions do not get anywhere near to a position where they might challenge our presence in the euro.”

Other than that, the Swiss vote against the Sovereign Money initiative was also cited as a reason for the strong demand for banking shares.

  • The pan-European FTSEurofirst 300 was up by 0.51% to 1,513.12
  • Germany’s DAX was up by 0.43% to 12,820.99
  • The blue-chip Euro Stoxx 50 was up by 0.54% to 3,463.45

Major Market Mover(s):

GBP

The pound was the biggest loser of the morning London session, thanks to strong selling pressure after the U.K. released a bunch of disappointing economic reports.

GBP/USD was down by 60 pips (-0.44%) to 1.3366, GBP/JPY was down by 72 pips (-0.45%) to 146.98, GBP/CAD was down by 17 pips (-0.10%) to 1.7398

USD

The Greenback started the trading session mixed but it managed to regain its bearings and was the top-performing currency of the session, even though there weren’t really any apparent catalysts.

It’s possible, however, that the Greenback may have been feeding off the euro’s weakness. It’s also possible that USD bears were just covering their shorts after last week’s USD slide and ahead of this week’s FOMC statement. Another possible reason is that USD pairs were getting a boost from the rise in U.S. bond yields.

USD/CAD was up by 45 pips (+0.35%) to 1.3017, USD/JPY was up by 18 pips (+0.18%) to 109.96, USD/CHF was up by 10 pips (+0.11%) to 0.9867

EUR

The euro surged higher during the earlier Asian session, very likely because of Italian Economy Minister Giovanni Tria’s comment on Sunday that Italy will not be leaving the euro.

The euro got a final bullish kick when Germany’s Altmaier said that Germany is still very open to working with the U.S. After that, however, the euro’s rally stalled and the euro was forced to give back its gains.

Other than traders having a reality check and/or profit-taking ahead of the ECB statement, there’s no clear reason for the reversal in the euro’s fortune, though. Well, Italy’s disappointing industrial production report was released around the time the euro began encountering sellers, but that’s only a mid-tier report at best, but it may have helped to kick the euro lower.

EUR/USD was down by 23 pips (-0.20%) to 1.1783, EUR/JPY was down by 32 pips (-0.22%) to 129.57, EUR/CHF was down by 18 pips (-0.15%) to 1.1627

CAD

The Loonie was the second worst-performing currency of the session, likely because of follow-through selling due to the slide in oil prices and Trump’s disparaging tweets against Canadian PM Trudeau over the weekend, such as the one below.

AUD/CAD was up by 31 pips (+0.32%) to 0.9901, NZD/CAD was up by 25 pips (+0.28%) to 0.9153, EUR/CAD was up by 25 pips (+0.16%) to 1.5340

Watch Out For:

  • No major economic reports are scheduled for release