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Risk aversion persisted during the morning London session, so the themes from earlier continued to play out,  namely demand for the safe-haven currencies (USD, JPY, CHF), with the yen emerging as the one safe-haven to rule them all.

Another theme that’s still playing is weakness on the part of the higher-yielding Aussie and Kiwi, with the Aussie still getting the worst of it.

The euro is also worth noting since it was actually the second worst-performing currency of the session after the Aussie.

  • Nationwide U.K. HPI m/m: -0.5% vs. 0.1% expected, 0.7% previous
  • German retail sales m/m: -0.4% vs. -0.1% expected, 0.9% previous
  • French preliminary HICP y/y: 2.5% as expected vs. 2.6% previous
  • Italian jobless rate: 10.4% vs. 10.8% expected, same as previous
  • Italian preliminary HICP y/y: 1.7% as expected vs. 1.9% previous
  • Euro Zone HICP y/y: 2.0% vs. steady at 2.1% expected
  • Euro Zone core HICP y/y: 1.0% vs. steady at 1.1% expected
  • Jobless rate in the Euro Zone: steady at 8.2% as expected

Major Events/Reports:

Euro Zone’s HICP report

A bunch of inflation reports for the Euro Zone and its member states were released earlier.

And focusing only on the HICP report for the Euro Zone as a whole, that showed that the Euro Zone’s headline HICP rose by 2.0% year-on-year in August, missing expectations that it would match the previous month’s annual pace of +2.1%.

Despite the miss, the reading is still well above the ECB’s forecast that headline HICP will increase by 1.7% year-on-year in 2018, as reported in the June Eurosystem/ECB Staff Macroeconomic Projections.

Meanwhile, HICP less energy, one of the ECB’s preferred measures for core inflation, ticked lower from +1.4% to +1.3%. But despite the weaker increase, the reading is still actually meeting the ECB’s forecast that HICP less energy will print a 1.3% annual increase by the end of the year.

As for HICP less energy and unprocessed food, another of the ECB’s preferred measures for core inflation, that also weakened from +1.3% to +1.2%. Even so, it’s still beating the ECB’s forecast of +1.1% by the end of the year.

Juncker speaks

European Commission President Jean Claude Juncker was interviewed earlier. And he said that the U.S. has been respecting the “ceasefire agreement” with the E.U.

However, Juncker warned that if the U.S. decides to slap tariffs on European cars, “then we will also do that.”

That comment was a response to Trump’s comment during a Bloomberg report wherein Trump was cited as saying that the E.U.’s trade policies are supposedly “almost as bad as China,” adding that the E.U.’s proposal to scrap auto tariffs is just “not good enough.”

Hua Chunying speaks

Chinese Foreign Ministry Spokesperson Hua Chunying gave a presser earlier during the session. And she was asked about the report that the U.S. will push trough with slapping imports on $200 billion worth of Chinese goods.

Well, she basically said that China ain’t backing down when she replied as follows:

“The so-called tough and pressureful practices of the US side are of no use to the Chinese side and are not conducive to solving the problem. Those who still believe that China will succumb to intimidation, threats and unwarranted accusations should wake up.”

“At the same time, China has always held a consistent attitude and stance on economic and trade frictions: We are committed to properly solving relevant issues through equality, reciprocity, honesty and pragmatic dialogue on the basis of mutual respect. It is believed that this is in the fundamental interests of the relevant parties and is in the common interest of the international community.”

Downbeat ending in Europe

Europe is still being plagued by risk aversion since the major European equity indices are broadly in negative territory.

Market analysts blamed the risk-off vibes on trade-related jitters because of Trump’s tough stance on China, as well as a potential trade conflict between the E.U. and the U.S. after Juncker delivered some retaliatoyr rhetoric to Trump’s comments that the E.U.’s trade policies are supposedly “almost as bad as China.”

  • The pan-European FTSEurofirst 300 was down by 0.69% to 1,496.81
  • Germany’s DAX was down by 0.84% to 12,389.11
  • The blue-chip Euro Stoxx 50 was down by 0.97% to 3,398.55

U.S. equity futures were also leaking red, so the risk-off vibes may carry over into the upcoming U.S. session.

  • S&P 500 futures were down by 0.16% to 2,897.50
  • Nasdaq futures were down by 0.10% to 7,641.75

Major Market Mover(s):

JPY

The yen managed to overpower the Swissy and the Greenback and was the top-performing currency of the session, as well as the biggest winner of the day (so far).

USD/JPY was down by 22 pips (-0.20%) to 110.77, CAD/JPY was down by 25 pips (-0.30%) to 84.99, CHF/JPY was down by 25 pips (-0.22%) to 114.43

AUD & NZD

The risk-off vibes likely continued to weigh on the higher-yielding Aussie and Kiwi. The Aussie is still getting the worst of it, though, likely because the RBA’s Corporate plan is also still weighing down on the Aussie.

AUD/USD was down by 21 pips (-0.29%) to 0.7224, AUD/JPY was down by 39 pips (-0.48%) to 80.03, AUD/CHF was down by 18 pips (-0.26%) to 0.6994

NZD/USD was down by 10 pips (-0.15%) to 0.6634, NZD/JPY was down by 26 pips (-0.36%) to 73.48, NZD/CHF was down by 9 pips (-0.14%) to 0.6420

EUR

The euro was hit by selling pressure when Juncker talked about retaliating against the U.S. However, it wasn’t until just before the Euro Zone’s HICP report was released that the euro began to sink broadly lower, so much so that the euro ended up being the second biggest loser of the session.

EUR/USD was down by 21 pips (-0.18%) to 1.1651, EUR/JPY was down by 49 pips (-0.38%) to 129.06, EUR/CHF was down by 18 pips (-0.16%) to 1.1279

Watch Out For:

  • 12:30 pm GMT: Canada’s RMPI (0.0% expected vs. 0.5% previous) and IPPI (-0.4% expected vs. 0.5% previous)
  • 1:45 pm GMT: Chicago PMI (63.0 expected vs. 65.5 previous)
  • 2:00 pm GMT: Revised University of Michigan consumer sentiment (95.5 expected vs. 95.3 previous)