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Today’s morning London session was rather busy, with plenty of themes playing out. And the most notable themes are the sustained safe-haven demand for the Greenback and the yen.

As for other themes of note, they include the Loonie’s slide, which sent the Loonie to the very bottom of the forex heap. Selling pressure on the euro because of Turkey-related worries is also another theme worth mentioning.

The euro wasn’t the second weakest currency of the session, though, since the pound was rushed by sellers near the end of the session.

  • Assumption Day being observed in some European countries today
  • U.K. CPI m/m: 0.0% as expected, same as previous
  • U.K. CPI y/y: 2.5% as expected vs. 2.4% previous
  • Core U.K. CPI y/y: steady at 1.9% as expected
  • HPI in the U.K. y/y: 3.0% vs. 2.7% expected, 3.5% previous
  • U.K. PPI input m/m: 0.5% vs. 0.1% expected, 0.3% previous
  • U.K. PPI output m/m: 0.0% vs. 0.1% expected, 0.3% previous
  • U.S. retail sales report coming up

Major Events/Reports:

U.K. CPI report

The U.K.’s July CPI report was released earlier. And according to the report, headline CPI was flat month-on-month yet again. However, this is within expectations.

Year-on-year, CPI rose by 2.5%, which is a tick faster compared to June’s +2.4%, but also falls within consensus, so it didn’t really impress the market.

More importantly, the +2.5% reading is below the BOE’s own forecast that CPI will increase by 2.6% in July, as laid out in the BOE’s August 2018 Inflation Report.

And a closer look at the details of CPI report shows that the headline reading’s uptick is not really broad-based since only 5 of the 12 CPI components printed stronger annual increase.

As for the other CPI components, 6 actually printed weaker or even negative readings, and the remainder was able to maintain the annual pace.

Overall, the July CPI report was within the market’s expectations, but the details paint a more negative picture.

Turkey rejects Brunson’s appeal for release

According to a CNN report, the Turkish lower court has rejected Brunson’s appeal to be released from house arrest yet again.

The report also mentioned that Brunson’s appeal is scheduled to be heard by an upper court on October 12.

For those who don’t know, Andrew Brunson is a U.S. Christian pastor who was arrested back in 2016 on terrorism charges for allegedly aiding Fethullah Gülen, one of the individuals being accused of masterminding the 2016 coup attempt against Erdogan.

And Brunson’s ongoing imprisonment has been a source of political tensions between the U.S. and Turkey. And as of last week, Brunson’s imprisonment was also used as a pretext to slap sanctions against Turkey, so Brunson also happens to be a source of economic pain for Turkey.

Zurbruegg speaks

SNB Vice President Fritz Zurbruegg was speaking at an event earlier. And he said that:

“The developments in recent days have shown that the currency markets remain fragile, and can lead to safe-haven flows into the Swiss franc.”

And that, in turn, justifies the SNB’s super loose monetary policy and promise (or threat) to continue intervening in the forex market to sneakily weaken the Swissy.

Commodities crumble

The commodities market was a sea of red during the morning London session, with almost all commodities printing losses.

And we can probably blame the commodities rout on the Greenback’s overall strength, which makes globally-traded commodities relatively more expensive to buy, especially for market players who are holding non-US$ currencies.

In fact, market analysts were blaming the slide of base metals like copper partly on the Greenback’s strength. Although weak Chinese data also helped to kick base metals down, market analysts say.

Other market analysts, meanwhile, were also blaming the slide in gold prices on the stronger buck.

And for reference, the U.S. dollar index was up by 0.21% to 96.75 for the day by the time the session came to an end.

Aside from Greenback strength, market analysts also blamed the slide in oil prices to speculation U.S. inventories will print an increase, as well as expectations that demand for oil would weaken since the outlook for the global economy is seen to be peaking.

Base metals were hammered down.

  • Copper was down by 2.54% to $2.614 per pound
  • Nickel was down by 2.49% to $13,095.00 per dry metric ton

Precious metals were also burned, despite the risk-off vibes.

  • Gold was down by 0.72% to $1,192.00 per troy ounce
  • Silver was down by 1.61% to $14.810 per troy ounce

Oil benchmarks were also sinking.

  • U.S. WTI crude oil was down by 1.06% to $66.33 per barrel
  • Brent crude oil was down by 0.72% to $71.94 per barrel

Risk aversion dominates in Europe

Most of the major European equity indices had a strong start, but risk aversion was clearly the name of the game since bullish momentum quickly faded and bears attacked in force, pushing almost all of the major European equity indices into the red by the end of the session.

Market analysts, attributed the earlier risk-on vibes to the Turkish Lira’s recovery.

As for the risk-off vibes later on, it’s not very clear what that was about. However, it’s possible that risk sentiment soured because of falling commodity prices, given that the basic materials and energy sectors were the biggest losers of the session.

  • The pan-European FTSEurofirst 300 was down by 0.49% to 1,499.45
  • Germany’s DAX was down by 0.17% to 12,340.57
  • The blue-chip Euro Stoxx 50 was down by 0.40% to 3,398.55

The risk-off vibes in Europe also weighed on U.S. equity futures.

  • S&P 500 futures were down by 0.35% to 2,831.00
  • Nasdaq futures were down by 0.51% to 7,419.50

Major Market Mover(s):

USD & JPY

The yen and the Greenback extended their gains and fought for the top spot during the session, with the yen ultimately coming out on top (for this session at least).

And demand for the yen and the Greenback were likely sustained by another bout of risk aversion.

USD/JPY was down by 19 pips (-0.17%) to 111.02, CAD/JPY was down by 30 pips (-0.35%) to 84.75, EUR/JPY was down by 44 pips (-0.35%) to 125.67

EUR/USD was down by 20 pips (-0.18%) to 1.1318, NZD/USD was down by 4 pips (-0.06%) to 0.6552, AUD/USD was down by 10 pips (-0.14%) to 0.7220

CAD

The Loonie was the worst-performing currency of the morning London session, very likely because Loonie pairs were tracking the slide in oil prices.

USD/CAD was up by 22 pips (+0.17%) to 1.3098, GBP/CAD was up by 9 pips (+0.05%) to 1.6638, NZD/CAD was up by 15 pips (+0.18%) to 0.8588

GBP

The pound traded sideways for most of the session. It did find sellers when the U.K.’s CPI report was released, but buyers were waiting and it looked like the pound was on course for a mixed finish.

However, sellers attacked the pound late into the session. It’s not very clear what induced sellers to attack, but some market analysts were pointing to Greenback strength.

GBP/USD was down by 18 pips (-0.16%) to 1.2702, GBP/JPY was down by 47 pips (-0.33%) to 141.02, GBP/NZD was down by 27 pips (-0.14%) to 1.9373

Watch Out For:

  • 12:30 pm GMT: Headline (0.1% expected vs. 0.5% previous) and core (0.4% expected, same as previous) readings for U.S. retail sales; read Forex Gump’s Trading Guide
  • 12:30 pm GMT: Empire State manufacturing survey (20.3 expected vs. 22.6 previous)
  • 12:30 pm GMT: preliminary U.S. non-farm productivity (2.4% expected vs. 0.4% previous) and unit labor costs (0.0% expected vs. 2.9% previous)
  • 1:15 pm GMT: U.S. industrial production (0.3% expected vs. 0.6% previous)
  • 1:15 pm GMT: U.S. capacity utilization rate (78.2% expected vs. 78.0 previous)
  • 2:00 pm GMT: U.S. business inventories (0.1% expected vs. 0.4% previous)
  • 2:00 pm GMT: NAHB U.S. housing market index (67.0 expected vs. 68.0 previous)
  • 2:30 pm GMT: U.S. crude oil inventories (-2.6M expected vs. -1.4M previous)