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The higher-yielding Aussie and Kiwi were in strong demand during the morning London session, likely because of the commodities rally, risk-friendly vibes, and the broadly weaker Greenback.

  • French flash manufacturing PMI: 53.1 vs. 52.5 expected, 52.5 previous
  • French flash services PMI: 55.3 vs. 55.7 expected, 55.9 previous
  • German flash manufacturing PMI: 57.3 vs. 55.5 expected, 55.9 previous
  • German flash services PMI: 54.4 vs. 54.5 expected, 54.5 previous
  • Euro Zone flash manufacturing PMI: 55.1 vs. 54.7 expected, 54.9 previous
  • Euro Zone flash services PMI: 54.4 vs. 55.1 expected, 55.2 previous
  • CBI’s U.K. industrial order expectations: 11 vs. 8 expected, 13 previous

Major Events/Reports:

Euro Zone PMI reports

Markit finally released the latest batch of PMI reports for Germany, France, and the Euro Zone as a whole.

And focusing only on the PMI reports for the Euro Zone as a whole, manufacturing PMI improved from a 19-month low of 54.9 to a two-month high of 55.1, beating expectations that the reading would deteriorate further to 54.7.

The Euro Zone’s services PMI reading wasn’t as upbeat since it dropped from a four-month high of 55.2 to a two-month low of 54.4, a much harder drop compared to the expected tumble to 55.1.

Overall, however, the Euro Zone economy doesn’t look too good since the Euro Zone’s composite PMI gell from 54.9 to a two-month low of 54.3.

And according to Markit, the weaker composite PMI reading was due mainly to “weakened new order inflows and reduced business expectations of future activity,” adding that “July saw the smallest increase in new orders since October 2016.”

Additional commentary noted that “the slowdown in order book growth [in the manufacturing sector] was partly due to weakened export gains, with new export orders registering the smallest monthly rise since August 2016.”

And since new order growth slowed, “employment growth moderated commensurately in July.”

That’s not the end of it, though, since Markit also found that “future expectations of business activity slipped to a 20-month low.”

And according to Chris Williamson, Chief Business Economist at IHS Markit, business sentiment dwindled because companies are wondering about the “extent to which domestic demand can remain sufficiently resilient to cushion the eurozone economy from the potential adverse impact of an escalating trade war on exports.”

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Commodities broadly rise

Commodities had another good run during the morning London session. And this time, precious metals were along for the ride, despite the risk-friendly vibes in Europe.

As to what sustained the commodities rally, we can probably thank the weaker Greenback for that since a weaker Greenback makes globally-traded commodities relatively cheaper, especially for market players who are holding currencies other than the Greenback.

And for reference, the U.S. dollar index was down by 0.18% to 94.26 for the day by the end of the session. It was in positive territory earlier.

Base metals did well again.

  • Copper was up by 1.22% to $2.780 per pound
  • Nickel was up by 0.88% to $13,490.00 per dry metric ton

Oil benchmarks also got a boost.

  • U.S. WTI crude oil was up by 1.31% to $66.86 per barrel
  • Brent crude oil was up by 1.02% to $72.16 per barrel

Precious metals did well enough, despite the risk-on vibes in Europe.

  • Gold was up up 0.11% to $1,226.90 per troy ounce
  • Silver was up by 0.49% to $15.500 per troy ounce

Risk appetite revived in Europe

The major European equity indices clawed their way up from yesterday’s losses and then some, which is a clear sign that appetite for risk has finally returned to Europe.

And according to market analysts, the risk-friendly vibes in Europe were due to positive earnings reports as the earnings season gets underway.

  • The pan-European FTSEurofirst 300 was up by 0.88% to 1,520.82
  • Germany’s DAX was up by 1.44% to 12,729.26
  • The blue-chip Euro Stoxx 50 was up by 0.91% to 3,484.75

U.S. equity futures were also well supported.

  • S&P 500 futures were up by 0.27% to 2,819.50
  • Nasdaq futures were up by 0.25% to 7,449.00

Global bond yields fall

Despite the risk-friendly vibes in the European equities market, global bond yields were broadly in the red as demand for bonds ramped up.

Global bond yields were probably dragged lower by European bond yields. And market analysts say that European bond yields fell because of the Euro Zone’s PMI reports, which were deemed as negative overall, as well as safe-haven demand for bonds because of trade-related jitters.

  • German 10-year bond yield down by 1.48% to 0.399%
  • French 10-year bond yield down by 0.90% to 0.709%
  • U.K. 10-year bond yield down by 0.47% to 1.267%
  • U.S. 10-year bond yield down by 0.62% to 2.947%
  • Canadian 10-year bond yield down by 0.02% to 2.222%

Major Market Mover(s):

AUD & NZD

The Aussie and Kiwi were broadly in demand during the session, with the Aussie ultimately coming out on top (for now at least).

Demand for the two higher-yielding currencies was likely prompted by the risk-friendly vibes in Europe, the commodities rally, and the Greenback’s overall weakness.

And between the two, it was the Aussie that had the winning edge (for now), since AUD/NZD was up by 12 pips (+0.11%) to 1.0884.

AUD/USD was up by 49 pips (+0.67%) to 0.7411, AUD/JPY was up by 32 pips (+0.40%) to 82.31, AUD/CHF was up by 33 pips (+0.46%) to 0.7359

NZD/USD was up by 38 pips (+0.56%) to 0.6808, NZD/JPY was up by 22 pips (+0.29%) to 75.62, NZD/CHF was up by 23 pips (+0.34%) to 0.6760

USD

The Greenback was the biggest loser of the morning London session and is also currently the second biggest loser of the day (so far) after the Swissy.

There were no apparent catalysts for the Greenback’s weakness, but since market analysts were attributing the Greenback’s strength yesterday to rising U.S. bond yields, we can probably blame the Greenback’s slide today to the slide in U.S. bond yields.

USD/CHF was down by 22 pips (-0.22%) to 0.9929, USD/JPY was down by 29 pips (-0.27%) to 111.06, USD/CAD was down by 40 pips (-0.31%) to 1.3149

CHF

Both the safe-haven yen and Swissy were under bearish pressure because of the risk-on vibes. However, the slide in global bond yields likely helped to stem the yen’s losses, so the yen was only the third worst-performing currency of the session.

The Swissy wasn’t as lucky, though, and was the second weakest currency of he morning London session, as well as the worst-performing currency of the day (so far).

EUR/CHF was up by 25 pips (+0.21%) to 1.1627, CAD/CHF was up by 9 pips (+0.12%) to 0.7551, GBP/CHF was up by 28 pips (+0.21%) to 1.3039

Watch Out For:

  • 1:00 pm GMT: U.S. HPI (0.3% expected vs. 0.1% previous)
  • 1:45 pm GMT: Markit’s flash manufacturing PMI (55.1 expected vs. 55.4 previous)
  • 1:45 pm GMT: Markit’s flash services PMI (56.5 expected, same as previous)
  • 2:00 pm GMT: Richmond Fed’s manufacturing index (18 expected vs. 20 previous)