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The higher-yielding Aussie and Kiwi were initially in the lead, likely because of the risk-friendly vibes in Europe. However, the pound later joined the race and even managed to beat the Kiwi.

The Kiwi and pound had nothing on the Aussie, though, since the Aussie was easily the top-performing currency of the session.

The euro, meanwhile, took a step back and was mixed during the session after surging higher during the earlier Asian session.

The euro did seem to get its second wind near the end, though, as the Greenback weakened across the board ahead of the FOMC’s meeting minutes, ADP report, and ISM non-manufacturing PMI report.

  • German factory orders m/m: 2.6% vs. 1.1% expected, -1.6% previous
  • Swiss CPI m/m: 0.0% vs. 0.1% expected, 0.4% previous
  • Euro Zone retail PMI: 51.8 vs. 51.7 previous
  • ADP report coming up
  • ISM’s U.S. non-manufacturing PMI report also coming up
  • FOMC meeting minutes will be released later

Major Events/Reports:

BOE’s Carney speaks

BOE Guv’nah Mark Carney gave a speech during the session. And he gave this rather positive assessment of the U.K. economy, which is basically just a rehash of the BOE’s positive assessment during the June 21 BOE statement.

“Domestically, the incoming data have given me greater confidence that the softness of UK activity in the first quarter was largely due to the weather, not the economic climate.”

“Overall, recent domestic data suggest the economy is evolving largely in line with the May Inflation Report projections, which see demand growing at rates slightly above those of supply and domestic cost pressures building.”

With regard to monetary policy, Carney had this cautiously hawkish statement, which is not really all that new:

“As the MPC has stressed, were the economy to develop broadly in line with the May Inflation Report projections … an ongoing tightening of monetary policy over the next few years would be appropriate to return inflation sustainably to its target at a conventional horizon.”

Other than that, Carney also talked about Brexit and Trump’s protectionist policies.

With regard to Brexit, Carney merely reiterated the BOE’s message that the BOE “assumes a relatively smooth transition to a Brexit,” while also noting that “business investment has been on the side lines, as Brexit-related uncertainties have outweighed otherwise very favourable conditions.”

But on a more upbeat note, “exporters have been in a sweet spot, benefiting from the lower level of sterling in anticipation of a Brexit that has not yet happened.”

As for Trump’s trade policies, Carney said that:

“There are some, tentative signs that this more hostile and uncertain trading environment may be dampening activity.”

Carney did have this optimistic message for the U.K. economy, though:

“Bank of England simulations suggest that the impact of narrow, bilateral tariff increases through direct trade channels would tend to be small … and would be largely confined to the countries directly involved.”

However, Carney was quick to add that “The hit to global and UK GDP would be substantially greater if everyone put up tariffs against everyone else.”

Overall, a cautiously hawkish message, but nothing really new or surprising.

Even so, market analysts pointed out Carney’s speech supposedly reinforced expectations for an August BOE rate hike.

More risk-taking in Europe

Europe apparently didn’t seem to mind the risk-off vibes from the earlier Asian session since most of the major European equity indices were in rally mode during the morning London session.

And market analysts say that the risk-friendly vibes in Europe were due to positive company updates and strong demand for auto shares, thanks to yesterday’s news that the U.S. may be willing to compromise on European auto imports.

  • The pan-European FTSEurofirst 300 was up by 0.70% to 1,498.84
  • Germany’s DAX was still up by 1.28% to 12,475.65
  • The blue-chip Euro Stoxx 50 was up by 1.04% to 3,446.85

U.S. equity markets also got a boost from the risk-friendly vibes in Europe, which implies that the upbeat risk sentiment may carry over into the upcoming U.S. session.

  • S&P 500 futures were down by 0.56% to 2,728.50
  • Nasdaq futures were down by 0.59% to 7,065.25

Major Market Mover(s):

AUD

The Aussie got a bullish boost right from the get-go, very likely because of the risk-on vibes and rising gold prices. It did struggle a bit against the Kiwi, though.

Still, the Aussie was eventually able to win out against the Kiwi and was even able to defend itself against the pound to claim the top spot during the session.

AUD/USD was up by 25 pips (+0.33%) to 0.7401, AUD/JPY was up by 31 pips (+0.39%) to 81.90, AUD/CAD was up by 22 pips (+0.23%) to 0.9717

GBP

The pound was already showing some strength from the start… except against the Kiwi and the Aussie. There was no apparent catalyst for the pound’s strength, but some market analysts were still pointing to yesterday’s stronger-than-expected PMI reading.

At any rate, the pound got a bullish boost when the text of Carney’s speech was released because, as mentioned earlier, Carney’s speech supposedly boosted expectations for an August BOE rate hike.

GBP/USD was up by 26 pips (+0.20%) to 1.3264, GBP/JPY was up by 34 pips (+0.24%) to 146.79, GBP/CHF was up by 19 pips (+0.15%) to 1.3150

USD

The Greenback barely lost out to the safe-haven yen and was the weakest currency of the morning London session.

There were no direct catalysts for the Greenback’s slide, but it’s possible that we’re just seeing some preemptive positioning and/or profit-taking ahead of the FOMC’s meeting minutes,  the ADP report, and ISM’s non-manufacturing PMI report.

USD/JPY was down by 5 pips (-0.05%) to 110.61, USD/CHF was down by 7 pips (-0.07%) to 0.9914, USD/CAD was down by 13 pips (-0.10%) to 1.3131

Watch Out For:

  • 12:15 pm GMT: ADP’s U.S. non-farm employment change (190K expected vs. 178K previous)
  • 12:30 pm GMT: U.S. initial jobless claims (225K expected vs. 227K previous)
  • 1:45 pm GMT: U.S. final services PMI (no change from 56.5 expected)
  • 2:00 pm GMT: ISM’s U.S. non-manufacturing PMI (58.3 expected vs. 58.6 previous)
  • 3:00 pm GMT: U.S. crude oil inventories (-4.4M expected -9.9M previous)
  • 6:00 pm GMT: FOMC meeting minutes will be released