Price action during the morning London session was rather muted when compared to the earlier session.
The session wasn’t a complete snooze fest, though, since the yen continued to take hits, very likely because of the risk-friendly vibes and rising bond yields during the session.
There were signs of risk aversion, though, which is probably why the Swissy was able to add to its gains. The Swissy wasn’t the top-performing currency of the session, though, since that honor goes to the Loonie.
And while the Greenback didn’t really stand out, it’s worth noting since the Greenback finally found support and traded mostly sideways after getting a beating earlier.
- Swiss trade balance: CHF 2.26B vs. CHf 2.85B expected, CHF 2.56B previous
- U.K. public sector net borrowing: -£2.9B vs. -£2.1B expected, £3.3B previous
- CBI’s U.K. industrial order expectations: 7 vs. 10 expected, 11 previous
- Brexit talks will resume later
Commodities were broadly in demand during the morning London session, with almost all commodities boasting gains.
The Greenback steadied during the session but is still a net loser for the day, which may have enticed more market players to buy up commodities.
And for reference, the U.S. dollar index was down by 0.23% to 95.47 for the day by the end of the session.
Aside from Greenback strength, market analysts also attributed the strong demand for base metals on cautious optimism that this week’s trade talks between the U.S. and China would hopefully pan out.
The rise in oil prices, meanwhile, was also attributed by market analysts to U.S. sanctions against oil producer Iran.
Base metals were leading the way.
- Copper was up by 0.92% to $2.693 per pound
- Nickel was up by 0.94% to $13,727.50 per dry metric ton
Precious metals were also in demand.
- Gold was up by 0.49% to $1,200.40 per troy ounce
- Silver was up by 0.92% to $14.805 per troy ounce
Oil benchmarks were in positive territory as well.
- U.S. WTI crude oil was up by 0.55% to $65.78 per barrel
- Brent crude oil was up by 0.66% to $72.69 per barrel
Another risk-friendly day in Europe, but…
Europe appeared to enjoy another bout of risk-taking that sent almost all of the major European equity indices higher.
Market analysts say that the apparent risk-taking in Europe were driven mainly by the Greenback’s recent weakness, which increased demand for export-oriented European companies, as well as strong demand for defensive shares.
And demand for defensive shares, in turn, was driven by caution ahead of trade talks between the U.S. and China after Trump dampened hopes when he said during a Reuters interview yesterday that he doesn’t “anticipate much” from the upcoming talks.
In other words, market players were loading up on defensive shares because of uncertainty surrounding the upcoming trade talks. And that’s a sign of risk aversion.
- The pan-European FTSEurofirst 300 was up by 0.33% to 1,504.21
- Germany’s DAX was up by 0.71% to 12,419.12
- The blue-chip Euro Stoxx 50 was up by 0.72% to 3,420.45
Global bond yields rise
Global bond yields were on the rise during the session, with European bond yields leading the way.
Global bond yields were likely pulled up by European bond yields. And according to market analysts, European bonds were on the rise partly because of the apparent risk-taking in Europe, as well as a capital flows to Italian bonds due to relief provided by Moody’s delaying its review of Italy’s credit rating.
- German 10-year bond yield up by 7.28% to 0.324%
- French 10-year bond yield up by 1.43% to 0.666%
- U.K. 10-year bond yield up by 2.04% to 1.249%
- U.S. 10-year bond yield up by 0.70% to 2.842%
- Canadian 10-year bond yield up by 1.02% to 2.275%
Major Market Mover(s):
The safe-haven yen continued to reel in pain and was the worst-performing currency of the morning London session, as well as the biggest loser of the day (so far).
Risk-taking prevailed during the morning London session. But as noted earlier, there were also signs of risk aversion since strong demand for defensive shares helped to drive up stocks. It’s therefore likely that yen pairs were taking more directional cues from rising bond yields.
USD/JPY was up by 23 pips (+0.22%) to 110.32, CHF/JPY was up by 28 pips (+0.26%) to 111.65, CAD/JPY was up by 26 pips (+0.30%) to 84.72
The Loonie was the strongest currency of the morning London session, likely because CAD pairs were tracking the rise in oil prices.
USD/CAD was down by 12 pips (-0.09%) to 1.3019, NZD/CAD was down by 15 pips (-0.17%) to 0.8674, GBP/CAD was down by 21 pips (-0.13%) to 1.6700
Like the yen, the Swissy is a also considered to be a safe-haven currency. Even so, the Swissy and the yen were on opposite ends of a spectrum since the Swissy was in demand during the session and second only to the Loonie.
Heck, the Swissy is even the second strongest currency of the day (s0 far) after the Kiwi.
As to why the Swissy was in demand, well, there’s no clear reason for that. However, it’s possible that market players were loading up on the Swissy because of uncertainty due to upcoming Brexit talks and trade talks between the U.S. and China. Also, I mentioned earlier that there were signs of risk aversion in the European equities market.
USD/CHF was down by 5 pips (-0.05%) to 0.9879, GBP/CHF was down by 11 pips (-0.08%) to 1.2673, NZD/CHF was down by 8 pips (-0.12%) to 0.6582
Watch Out For:
- 12;30 pm GMT: U.K. Brexit Secretary Dominic Raab and E.U. Chief Brexit Negotiator Michel Barnier will meet later
- 12:30 pm GMT: Canadian wholesale sales (0.7% expected vs. 1.2% previous)
- 10:45 pm GMT: Headline (0.4% expected vs. 0.1% previous) and core (0.8% expected vs. 0.6% previous) readings for New Zealand’s quarterly retail sales
- Dairy auction currently underway (0.0% previous); auction usually ends at around 2:00 pm GMT