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After wobbling a bit during the earlier Asian session, the Greenback finally regained its footing and resumed its uphill march during today’s morning London session.

The Greenback failed to claim the top spot, though, since falling bond yields and signs that risk aversion may be returning apparently gave the yen a strong enough boost to steal victory from the Greenback.

Greenback strength and signs that risk aversion may be returning, as well as falling commodity prices, meanwhile, really put the hurt on the higher-yielding Aussie and Kiwi.

  • German WPI m/m: 0.5% vs. 0.4% expected, 0.8% previous
  • Swiss PPI m/m: 0.2% as expected, same as previous
  • Chinese new yuan loans: 1,840B vs. 1,570B expected, 1,150B previous

Major Events/Reports:

Commodities fall back down

Yesterday’s recovery was apparently short-lived since commodities were broadly in the red again during today’s morning London session.

And we can probably attribute the broad-based commodities slide to the Greenback’s strength. And for reference, the U.S. dollar index was up by 0.40% to 94.94 for the day by the end of the session.

Precious metals were in down.

  • Gold was down by 0.47% to $1,240.80 per troy ounce
  • Silver was down by 0.92% to $15.830 per troy ounce

Base metals were also down.

  • Copper was down by 0.47% to $2.764 per pound
  • Nickel was down by 1.67% to $13,997.50 per dry metric ton

Oil benchmarks were leaking red.

  • U.S. WTI crude oil was down by 0.24% to $70.14 per barrel
  • Brent crude oil was down by 0.69% to $73.94 per barrel

Fading appetite for risk

The major European equity indices opened higher and then moved higher still, which is a sign that risk appetite is here to stay for another day.

However, the major European equity indices later came off their highs about halfway through the session. They then continued to make their way down after that, which implies that appetite for risk is fading in Europe.

Market analysts attributed the risk-taking at the start to optimism and/or speculation that earnings season will be a good one, as well as easing fears related to a full-blown trade war.

As to why appetite for risk began to fade later, there’s no clear reason for that. However, it’s possible that investors were just taking some profits off the table to avoid weekend risk. It’s also possible that lingering trade-related concerns evantually won out since the slide in bond yields was attributed partly to that.

  • The pan-European FTSEurofirst 300 is still up by 0.26% to 1,508.15 but off the day’s high at 1,513.05
  • Germany’s DAX is still up by 0.29% to 12,530.65 but off the day’s high at 12,584.59
  • The blue-chip Euro Stoxx 50 is still up by 0.27% to 3,455.15 but off the day’s high at 3,465.75

Global bond yields fall

Another sign that risk aversion seems to be making a comeback was the demand for bonds, which caused global bond yields to slide.

Global bond yields were likely dragged lower by the plunge in European bond yields.

And European bond yields slumped, in turn, because of safe-haven demand for bonds due to lingering trade war fears, as well as yesterday’s ECB minutes, which were viewed as dovish overall, market analysts say.

  • German 10-year bond yield down by 9.86% to 0.265%
  • French 10-year bond yield down by 3.71% to 0.613%
  • U.K. 10-year bond yield down by 2.81% to 1.247%
  • U.S. 10-year bond yield down by 0.52% to 2.838%
  • Canadian 10-year bond yield down by 0.3% to 2.150%

Major Market Mover(s):

USD

The Greenback had a good run during the morning London. It barely lost out to the yen, though, and is therefore only in second place.

Anyhow, there were no apparent catalysts for the Greenback’s rise, but market analysts pointed to safe-haven demand for the Greenback due to lingering trade-related fears, as well as strong rate hike expectations since yesterday’s CPI report were apparently not enough to derail expectations for further hikes.

USD/JPY was down by 8 pips (-0.08%) to 112.60, USD/CAD was up by 29 pips (+0.22%) to 1.3197, USD/CHF was up by 31 pips (+0.31%) to 1.0067

JPY

The yen managed to eke out a win against the Greenback and was the top-performing currency of the morning London session, likely because of the slide in global bond yields and signs that risk aversion may be returning.

However, it’s also possible that some yen bears are just covering their shorts. After all, the yen is currently the biggest loser of the week.

CAD/JPY was down by 17 pips (-0.20%) to 75.34, CHF/JPY was down by 32 pips (-0.29%) to 111.88, GBP/JPY was down by 29 pips (-0.20%) to 147/88

AUD & NZD

Falling commodity prices, a stronger U.S. dollar, and signs that risk aversion may be returning meant a triple whammy for the higher-yielding Aussie and Kiwi.

And between the two, it was the Kiwi that got the worst of it since AUD/NZD was up by 7 pips (+0.06%) to 1.0964.

AUD/USD was down by 30 pips (-0.40%) to 0.7375, AUD/JPY was down by 33 pips (-0.41%) to 83.06, AUD/CAD was down by 19 pips (-0.19%) to 0.9732

NZD/USD was down by 31 pips (-0.46%) to 0.6726, NZD/JPY was down by 35 pips (-0.47%) to 75.76, NZD/CAD was down by 22 pips (-0.24%) to 0.8877

Watch Out For:

  • 12:30 pm GMT: U.S. import prices (0.1% expected, 0.6% previous)
  • 2:00 pm GMT: University of Michigan’s preliminary consumer sentiment (98.0 expected vs. 98.2 previous)
  • 3:00 pm GMT: U.S. Fed’s monetary policy report will be released