The pound jumped higher at the start of the session and was able to maintain the lead until the end of the session. All the comdolls (NZD, AUD, CAD), meanwhile, were feeling some bearish pressure as commodities retreated.
- French non-farm payrolls: 0.2% vs. 0.3% expected, 0.4% previous
- Italian jobless rate: 11.1% as expected, same as previous
- U.K. jobless rate: steady at 4.2% as expected
- U.K. average earning (3m y/y): 2.5% as expected vs. 2.6% previous
- Claimant count change in the U.K.: -7.7K vs. 11.3K expected, 31.2K previous
- Chinese new yuan loans: 1,150B vs. 1,200B expected, 1,180B previous
- German ZEW economic sentiment: -16.1 vs. -14.6 expected, -8.2 previous
- Euro Zon ZEW economic sentiment: -12.6 vs. 0.1 epxected, 2.4 previous
- U.S. NFIB small business index: 107.8 vs. 105.2 expected, 104.8 previous
- Debate on E.U. withdrawal bill will soon be underway
- U.S. CPI report coming up
U.K. jobs report
The U.K.’s latest jobs report was released earlier during the session. And as expected, the jobless rate in the three months to April held steady at 4.2%, which is a 42-year low.
The number of people who claimed unemployment benefits, meanwhile, fell by 7.7K in May, which is great because the market was expected a 11.3K increase.
As for wage growth, average weekly earnings only grew by 2.5% year-on-year in April. This matches the annual increase in March and puts an end to three straight month of ever weaker readings.
On a more downbeat note, if bonuses are stripped to get regular earnings, then average weekly earnings onlu increased by 2.5%, a sudden slowdown compared to the 3.0% increase recorded in March, as well as the weakest annual reading in 5 months.
But on a more upbeat note, real wage growth (inflation is taken into account) increased by 0.2% year-on-year in April, a tick faster compared to the 0.1% rise printed back in March.
If bonuses are stripped, however, then real wage growth only increased by 0.1%, much slower compared to the 0.7% increase in March. Even so, it marks the fourth consecutive month of positive readings for real wage growth after after 10 consecutive months of declines.
Commodities were broadly in retreat in during the morning London. And while the Greenback was mixed during the session itself, the Greenback is still mostly higher for the day, and that may be the reason why commodities were broadly in the red during the session.
Well, that’s why precious metals, particularly gold, were down, market analysts say.
And just for reference, the U.S. dollar index was up by 0.11% to 93.65 for the day when the session ended.
Other than that, market analysts also blamed the slide in oil prices on profit-taking ahead of the OPEC meeting and OPEC’s monthly report which pointed to an uncertain outlook for the oil market.
Precious metals were down despite the returning risk-off vibes in Europe.
- Gold was down by 0.15% to 1,301.30 per troy ounce
- Silver was down by 0.40% to $16.885 per troy ounce
Oil benchmarks were also leaking red.
- U.S. WTI crude oil was down by 0.24% to $65.94 per barrel
- Brent crude oil was down by 0.41% to 76.15 per barrel
Base metals were mostly in negative territory.
- Copper was down by 0.43% to $3.243 per pound
- Zinc was down by 0.10% to $3,201.25 per dry metric ton
Risk aversion returns
The major European equity indices started the session on a strong footing before encountering broad-based selling pressure and beating a hasty retreat, which pushed most of the major European equity indices into negative territory.
Market analysts attributed the earlier risk-on vibes to optimism because of positive news for French food retailers Casino and Carrefour.
As for the later slide, market analysts were already noting that commodities-related shares were felling some bearish pressure, so it’s very likely that the commodities rout is the main reason for the souring risk sentiment.
However, the major European equity indices also began to encounter more sellers when the ZEW Economic Sentiment index sorely missed expectations.
- The pan-European FTSEurofirst 300 was down by 0.05% to 1,517.04 after reaching an intrady high of 1,523.44 earlier
- Germany’s DAX was down by 0.21% to 12,818.18 after reaching an intrady high of 12,947.51 earlier
- The blue-chip Euro Stoxx 50 was down by 0.10% to 3,479.85 after reaching an intrady high of 3,497.05 earlier
The risk-off vibes also weighed down on U.S. equity futures, so the risk-off vibes may potentially carry over into the upcoming U.S. session.
- S&P 500 futures were down by 0.12% to 2,783.50
- Nasdaq futures were down by 0.13% to 7,186.75
Major Market Mover(s):
The pound got a bullish boost at the start of the morning London session and ahead of the U.K.’s latest jobs report.
Speaking of the jobs report, that was roughly within expected, although wage growth did paint a somewhat mixed picture. At any rate, the pound barely reacted to the jobs report.
As to why the pound jumped higher at the start of the session, there’s no clear reason for that.
Some market analysts were pointing to possible short covering, though, since the pound was broadly weaker before the session rolled around. Also, the House of Commons will start debating the E.U. Withdrawal Bill today.
Anyhow, the pound was able to preserve its gains (for now) and therefore closed out the session as the top-performing currency.
GBP/USD was up by 32 pips (+0.24%) to 1.3382, GBP/AUD was up by 40 pips (+0.23%) to 1.7585, GBP/NZD was up by 50 pips (+0.26%) to 1.9033
The Aussie, Kiwi, and Loonie all got whipped during the morning London session, likely because of the broad-based slide in commodity prices.
And among the three of ’em, it was the higher-yielding Kiwi that was the weakest, probably because it was getting some extra selling pressure due to the risk-off vibes.
NZD/USD was down by 9 pips (-0.13%) to 0.7031, NZD/CHF was down by 15 pips (-0.21%) to 0.6924, NZD/JPY was down by 10 pips (-0.13%) to 77.55
AUD/USD was down by 5 pips (-0.06%) to 0.7609, AUD/CHF was down by 13 pips (-0.18%) to 0.7494, AUD/JPY was down by 6 pips (-0.07%) to 83.92
USD/CAD was up by 8 pips (+0.06%) to 1.3006, CAD/JPY was down by 11 pips (-0.13%) to 84.81, CAD/CHF was down by 18 pips (-0.24%) to 0.7572
Watch Out For:
- 12:30 pm GMT: Headline (0.2% expected, same as previous) and core (0.1% expected, same as previous) readings for U.S. CPI
- 6:00 pm GMT: U.S. Federal budget balance (-$119.0B expected vs. $214.3B previous)
- U.K. House of Commons will debate on E.U. Withdrawal Bill