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Trading conditions were relatively tight during the morning London session. With that said, risk-taking persisted and commodities continued to recover during the session, so the Aussie was able to add a bit more to its gains. The Aussie did lose some ground against the Greenback, though. The pound, meanwhile, was down in the dumps despite a better-than-expected U.K. retail sales report.

  • German WPI m/m: 0.0% vs. 0.5% expected, 0.5% previous
  • U.K. retail sales m/m: 0.7% vs. 0.2% expected, -0.5% previous
  • U.K. core retail sales m/m: 0.9% vs. 0.0% expected, -0.6% previous
  • Euro Zone trade balance: €16.7B vs. €16.9B expected, same as previous

Major Events/Reports:

U.K. retail sales report

The Office for National Statistics (ONS) released the U.K.’s July retail sales report earlier.

And it revealed that headline retail sales volume in the U.K. increased by 0.7% month-on-month, beating expectations for a 0.2% rise, which is a nice rebound after the 0.5% decline experienced in June and is a promising start for Q3 to boot.

The increase was broad-based since many retail store types printed higher sales, which is why the core reading also beat expectations by printing a 0.9% month-on-month increase (+0.0% expected).

Year-on-year, retail sales volume increased by 3.5%, which is the strongest increase since April 2017 and easily beats expectations for a 3.0% increase.

However, the retail sales report did imply that the boost in sales is only temporary since the report noted that:

“Many consumers stayed away from some high street stores in July, but online sales were very strong, supported by several retailers launching promotions. Food sales remained robust as people continued to enjoy the World Cup and the sunshine.”

Commodities extend bounce

After yesterday’s beat-down, commodities were able to stage a broad-based recovery during the earlier Asian session and then extended that recovery during the morning London session, with base metals leading the way.

The Greenback managed to pare some of its losses and was a net winner during the session. However, the Greenback is still a net loser for the day, which may have helped to sustain demand for commodities.

And for reference, the U.S. dollar index was down by 0.14% to 96.46 for the day by the time the session came to an end. It reached an intraday low of 96.28 earlier in the day.

Other than that, market analysts are also attributing the rise in oil prices to renewed optimism because of planned trade talks between the U.S. and China. Market analysts also pointed to renewed trade talk hopes for the strong bounce in base metal prices.

Base metals were leading the way.

  • Copper was up by 1.88% to $2.608 per pound
  • Nickel was up by 2.50% to $13,207.50 per dry metric ton

Precious metals were also in the green, although gold did find sellers later.

  • Gold was up by 0.09% to $1,185.90 per troy ounce
  • Silver was up by 0.94% to $14.590 per troy ounce

Oil benchmarks were in positive territory.

  • U.S. WTI crude oil was up by 0.11% to $65.08 per barrel
  • Brent crude oil was up by 0.34% to $71.00 per barrel

Risk-friendly vibes in Europe

Risk-taking finally prevailed in Europe since most of the major European equity indices were in the green when the morning London session came to an end.

And according to market analysts, the risk-on vibes in Europe were due to risk sentiment spillover from the earlier Asian session since the upbeat news that China will meet with U.S. representatives for trade talks was still being cited for the bout of risk-taking.

It’s also very likely that the recovery in commodity prices helped to improve risk sentiment since mining shares were one of the biggest winners during the session. But then again, the recovery in commodity prices is partly due to the planned trade talks between the U.S. and China.

  • The pan-European FTSEurofirst 300 was up by 0.37% to 1,491.04
  • Germany’s DAX was up by 0.48% to 12,220.85
  • The blue-chip Euro Stoxx 50 was up by 0.76% to 3,375.85

U.S. equity futures were also well-supported. And that implies that the risk-friendly vibes may also carry over into the upcoming U.S. session.

  • S&P 500 futures were up by 0.44% to 2,833.75
  • Nasdaq futures were up by 0.65% to 7,422.25

Major Market Mover(s):

AUD

The higher-yielding Aussie was well-supported during the morning London session, very likely because of the risk-friendly vibes and recovery in commodity prices.

The Aussie wasn’t the top-performing currency, though, since it barely lost out to the Greenback.

AUD/USD was down by 5 pips (-0.07%) to 0.7264, AUD/CHF was up by 7 pips (+0.10%) to 0.7220, AUD/CAD was up by 11 pips (+0.12%) to 0.9551

USD

The Greenback encountered selling pressure earlier, apparently because of the planned trade talks between the U.S. and China, which may have prompted some unwinding of trade-related safe-haven bets.

However, the Greenback spent most of the session steadily clawing its way back up and was even able to win out against the Aussie. No clear reason why, though.

USD/JPY was up by 10 pips (+0.09%) to 110.87, USD/CHF was up by 13 pips (+0.13%) to 0.9937, USD/CAD was up by 22 pips (+0.17%) to 1.3147

GBP

The pound was the biggest loser of the session. And while the better-than-expected retail sales report did give the pound some respite, there were just not enough buyers to counter the selling pressure that was being brought to bear on the pound.

There weren’t any apparent catalysts for the selling pressure on the pound, but market analysts were pointing to the usual suspects: growing concerns over a “no deal” Brexit and the Greenback’s overall strength.

GBP/USD was down by 24 pips (-0.19%) to 1.2696, GBP/AUD was down by 32 pips (-0.18%) to 1.7472, GBP/NZD was down by 28 pips (-0.15%) to 1.9291

Watch Out For:

  • 12:30 pm GMT: U.S. building permits (1.31M expected vs. 1.29M previous)
  • 12:30 pm GMT: U.S. housing starts (1.27M expected vs. 1.17M previous)
  • 12:30 pm GMT: Philadelphia Fed manufacturing index (22.0 expected vs. 25.7 previous)
  • 12:30 pm GMT: U.S. initial jobless claims (215K expected vs. 213K previous)
  • 12:30 pm GMT: Canadian manufacturing sales (1.0% expected vs. 1.4% previous)
  • 12:30 pm GMT: ADP’s Canadian non-farm employment change (-10.5K previous)
  • 1:30 pm GMT: CB’s U.K. leading index (0.0% previous)
  • 10:45 pm GMT: New Zealand’s PPI input (0.2% expected vs. 0.6% previous)
  • 10:45 pm GMT: New Zealand’s PPI output (0.1% expected vs. 0.2% previous)