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Today’s morning London session was rather lively, with many themes playing out.

And the major theme appears to be the Greenback’s recovery, which caused most commodities to tank and dragged the higher-yielding Aussie and Kiwi lower, despite the risk-friendly vibes in Europe.

Not all commodities felt the pain, though, since oil benchmarks continued to soldier on, which likely gave the Loonie a boost as well, allowing the Loonie to come in second place after the Greenback.

The pound’s recovery, meanwhile, is another notable theme, especially after yesterday’s selloff. Unfortunately for GBP bulls, the pound’s recovery began to lose steam after a bunch of U.K. economic data failed to impress, so the pound only came in third place.

As for the other currencies, the yen and Swissy were mixed, despite the risk-on vibes.

The euro, meanwhile, was initially mixed but became the third worst-performing currency after the Kiwi and Aussie. And that’s because of a bunch of disappointing Euro Zone data, with the poor readings for the ZEW economic sentiment being the biggest catalyst.

  • French industrial production m/m: -0.2% vs. 0.6% expected, -0.5% previous
  • Italian industrial production m/m: 0.7% vs. 0.9% expected, -1.3% previous
  • U.K. industrial production m/m: -0.4% vs. 0.5% expected, -1.0% previous
  • U.K. manufacturing production m/m: 0.4% vs. 0.8% expected, -1.3% previous
  • Construction output in the U.K. m/m: 2.9% vs. 0.3% expected, 0.0% previous
  • U.K. goods trade balance: -£12.4B vs. -£11.9B expected, -£12.4B previous
  • U.K. GDP m/m: 0.3% as expected
  • German ZEW economic sentiment: -24.7 vs. -18.5 expected, -16 .1 previous
  • Euro Zone ZEW economic sentiment: -18.7 vs. -13.2 expected, -12.6 previous

Major Events/Reports:

Mostly disappointing U.K. data

The Office for National Statistics (ONS) released a slew of economic of report for the U.K. during the session. And unfortunately (for GBP bulls), most of them failed to meet expectations.

First up is the U.K.’s Index of Production report, which revealed that total industrial production in the U.K. fell by 0.4% month-on-month in May, marking the second consecutive month of declines. This is bad because the market was expecting a 0.5% increase. Worse, the previous reading was revised to show a 1.0% monthly contraction (-0.8% previous).

The decline in total industrial production was due to the 4.6% plunge in mining and quarrying output, as well as the 3.2% slump in electricity, gas, and steam production. The weaker-than-expected 0.4% increase in manufacturing output also didn’t help. And did I mention that the market was expecting that manufacturing output will rebound by +0.8% after last month’s disappointing 1.3% contraction.

Moving on, the next economic report is the U.K.’s May construction output report. And fortunately, the report surprised to the upside by printing a 2.9% month-on-month rise, a much stronger reading compared to the expected +0.3%.

Next up is the U.K.’s May trade report. And that showed that the U.K.’s trade gap narrowed slightly from £3.09 billion to £2.79 billion, thanks partly to the goods trade deficit narrowing slightly from £12.40 billion to £12.36 billion. Unfortunately the market was expected the deficit in trade goods to narrow even further to £11.90 billion.

But on a more upbeat note, total exports did rise by 2.9% to a four-month high of £51.85 billion in May. It just so happens that imports rose by 2.1% to £54.64.

Anyhow, the final economic report that was released during the session was the U.K.’s first ever monthly GDP report, which revealed that the GDP grew by 0.3% month-on-month in May, meeting the market’s expectations.

However, a quick glance at the report shows that GDp growth was driven exclusively by the service sector – all other sectors were drags to the economy, with the exception of Agriculture since that sector was flat for the month.

Oil rises as other commodities fall

Most commodities got a severe beat-down during the morning London session. Oil wasn’t one of them, however, since oil benchmarks were clearly swimming against the bearish tide and even managed to extend their gains from earlier.

The broad-based slide in commodity prices was likely due to the Greenback’s recovery, which made globally-traded currencies relatively more expensive to buy, especially for investors who are holding non-USD currencies.

And for reference, the U.S. dollar index was up by 0.42% to 94.19 for the day by the end of the session. Also, I mentioned earlier that the Greenback was the top-performing currency of the morning London session.

As to why oil was able to float in the sea of red, market analysts say that was due to weaker supply, thanks to lower oil output from Libya and a strike in Norway that already shut down one oilfield.

Precious metals got hurt bad.

  • Gold was down by 0.83% to $1,249.10 per troy ounce
  • Silver was down by 1.11% to $15.960 per troy ounce

Base metals were actually mixed, but most were in the red.

  • Copper was down by 1.02% to $2.821 per pound
  • Zinc was down by 2.34% to $2,634.75 per dry metric ton

As mentioned earlier, oil benchmarks were swimming against the bearish tide.

  • U.S. WTI crude oil was up by 0.58% to $74.28 per barrel
  • Brent crude oil was up by 1.26% to $79.03 per barrel

More risk-taking in Europe

The major European equity indices enjoyed another round of risk-taking, sending them broadly higher. Some indices even managed to hit multi-week highs.

And market analysts say that today’s bout of risk-taking was due to rising oil prices, fading trade war concerns, and anticipation that earnings season will yield promising results for European companies.

  • The pan-European FTSEurofirst 300 was up by 0.35% to 1,512.33
  • Germany’s DAX was up by 0.41% to 12,594.71
  • The blue-chip Euro Stoxx 50 was up by 0.22% to 3,472.25

U.S. equity markets also enjoyed the risk-on vibes, so risk-taking will likely persist into the upcoming U.S. session.

  • S&P 500 futures were up by 0.22% to 2,793.75
  • Nasdaq futures were up by 0.35% to 7,325.75

Major Market Mover(s):

USD

The Greenback staged a broad-based recovery and was the top-performing currency of the morning London session.

There were no apparent catalysts for the Greenback’s recovery, but some market analysts suggested relief buying since the market supposedly thinks that the negative effects of a trade war have yet to manifest themselves.

USD/JPY was up by 21 pips (+0.19%) to 111.26, USD/CHF was up by 28 pips (+0.29%) to 0.9944, USD/CAD was up by 13 pips (+0.10%) to 1.3138

CAD

The Loonie came in second place, likely because the Loonie was tracking the rise in oil prices.

EUR/CAD was down by 41 pips (-0.27%) to 1.5377, AUD/CAD was down by 28 pips (-0.29%) to 0.9769, NZD/CAD was down by 35 pips (-0.38%) to 0.8946

NZD & AUD

The higher-yielding Kiwi and Aussie were respectively the weakest and second-weakest currencies of the morning London session, even though risk-taking prevailed. And we can probably blame the two comdolls’ weakness on the slide in commodity prices and the Greenback’s strength.

NZD/USD was down by 33 pips (-0.48%) to 0.6809, NZD/JPY was down by 23 pips (-0.30%) to 75.76, NZD/CHF was down by 15 pips (-0.22%) to 0.6771

AUD/USD was down by 29 pips (-0.38%) to 0.7435, AUD/JPY was down by 17 pips (-0.21%) to 82.73, AUD/CHF was down by 10 pips (-0.13%) to 0.7394

GBP

The pound was initially the top-performing currency, thanks to a bullish boost right from the get-go, which market analysts attributed to investors betting that Theresa May will survive the recent departures of her ministers.

Sadly for the pound, a bunch of mostly disappointing U.K. economic reports was released, which caused the pound’s recovery to stop for a while, giving the Greenback and the Loonie an opportunity to outpace the pound. And so the pound ended up in third place, which ain’t too bad, considering yesterday’s GBP selloff.

GBP/USD was down by 6 pips (-0.05%) to 1.3246 after hitting an intraday high at 1.3301, GBP/AUD was up by 59 pips (+0.34%) to 1.7815 after hitting an intraday high at 1.7838, GBP/NZD was up by 85 pips (+0.44%) to 1.9453 after hitting an intraday high at 1.9482

Watch Out For:

  • 12:15 pm GMT: Canadian housing starts (195K expected vs. 196K previous)
  • 12:30 pm GMT: Canadian building permits (-0.5% expected vs. -4.6% previous)
  • 2:00 pm GMT: U.S. JOLTS job openings (6.88M expected vs. 6.70M previous)