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There were signs that risk aversion was loosening its grip on Europe, so the safe-haven currencies (USD, CHF, JPY) all pared some of their gains for the day.

And the two currencies that benefited the most from that weakness were the euro and the Kiwi since the two were neck-and-neck for the most part, although the Kiwi eventually pulled ahead to claim the top spot … for now at least.

And while the pound was mixed (but a net loser) during the session itself, it’s worth highlighting since the pound has been under bearish pressure since the earlier Asian session and the U.K.’s better-than-expected services PMI reading wasn’t really able to attract enough buyers to stop the bleeding.

  • Spanish services PMI: 52.7 vs. 52.1 expected, 52.6 previous
  • Italian services PMI: 52.6 vs. 53.2 expected, 54.0 previous
  • French final services PMI: 55.4 vs. no change from 55.7 expected
  • German final services PMI: 55.0 vs. no change from 55.2 expected
  • Euro Zone final services PMI: no change from 54.4 as expected
  • U.K. services PMI: 54.3 vs. 53.9 expected, 53.5 previous
  • Euro Zone retail sales m/m: -0.2% vs. -0.1% expected, 0.3% previous
  • BOC monetary policy statement later
  • NAFTA talks will resume later

Major Events/Reports:

U.K. services PMI

We finally got our hands on the U.K.’s latest services PMI report. And fortunately, the headline reading jumped from 53.5 to 54.3, beating expectations that the reading would only rise to 53.9.

And according to commentary from Markit, “service providers experienced a stronger increase in business activity and incoming new work during August.”

And with regard to jobs growth, Markit found that “The rate of job creation was the fastest since February, reflecting efforts to boost business capacity and meet increased workloads.”

Even better, recruitment of “suitably skilled staff contributed to higher salary payments in August,” which is a promising sign for wage growth.

Markit’s finding on inflation were a bit disappointing, though. Sure, service providers reported “a sharp and accelerated rise in average cost burdens,” thanks partly to higher wages. But despite higher input costs, “intense competitive pressures meant that prices charged inflation was only modest and remained well below the peak seen in November 2017.”

Another disappointing bit is that “business optimism eased to a fivemonth low and remained subdued in comparison to the long-run survey average.”

And as usual, survey respondents blamed “Brexit uncertainty” for their poor expectations and aversion to investing in large-scale projects.

Theresa May on Brexit

British PM Theresa May spoke in Parliament late into the session. And she had this to say with regard to Brexit:

“We are working for a good deal. We are still working, as are the European Union, for the timetable that was set of October because we are leaving the European Union on the 29 March 2019. We will need to pass legislation in this House prior to our leaving.”

Merkel allies want ECB to tighten quickly

Reuters claimed in a report earlier that it has supposedly seen a draft of a document from the Christian Social Union (CSU).

And for those who don’t know, the CSU is a sister party of German Chancellor Angela Merkel’s Christian Democratic Union (CDU).

Anyhow, the report cited the CSU as stating the following in the draft:

“We want an end to the low interest rate policy. The ECB must end its bond-buying programme as soon as possible.”

And in a follow-up report, Reuters also cited the CSU as stating the following on Brexit:

“The United Kingdom remains a close economic partner and ally. We decisively reject a hard Brexit.”

Italy will play nice with E.U.

Italian Deputy Prime Minister Matteo Salvini was speaking earlier. And he reassured investors by saying that the Italian government will play nice with the E.U. and follow E.U. fiscal rules when he said that:

“Clearly we will not do everything in one shot, not even Italians expect that from us… If we want to run the country for a long period we cannot blow up its public accounts.”

Luigi Di Maio, another Italian Deputy Prime Minister, would later give the same reassurances when he said that:

“The budget law will be courageous and will keep accounts in order … Here, we have people saying we want to wreck the accounts and destroy Europe.”

Both Deputy Prime Ministers and other top Italian officials are expected to meet with Prime Minister Giuseppe Conte later to discuss the budget.

Risk aversion losing grip in Europe?

The major European equity indices opened lower and then sank even lower for yet another day, which is a sign that risk aversion is still plaguing Europe.

And like yesterday, market analysts were blaming the risk-off vibes mainly on trade-related jitters and concerns over emerging markets.

However, risk aversion appeared to ease during the later half of the session since almost all of the major European equity indices were well off their lows. They’re still deep in negative territory, though.

As to why risk aversion began to ease, that may have been due to optimism related to Italy after the Italian government reassured investors that they’ll play nice and respect E.U. fiscal rules since Italian banks were outperforming despite the prevalence of risk aversion.

  • The pan-European FTSEurofirst 300 was down by 0.58% to 1,476.23 but reached an intraday low of 1,470.42 earlier
  • Germany’s DAX was down by 0.60% to 12,137.07 but reached an intraday low of 12,077.69 earlier
  • The blue-chip Euro Stoxx 50 was down by 0.66% to 3,336.85 but reached an intraday low of 3,316.85 earlier

Major Market Mover(s):


The Kiwi was the top-performing currency of the morning London session, very likely because it was feeding off the Greenback’s weakness, although it’s also likely that the higher-yielding Kiwi may have been attracting demand because of signs that risk aversion may be fading.

NZD/USD was up by 17 pips (+0.27%) to 0.6562, NZD/CHF was up by 18 pips (+0.29%) to 0.6396, NZD/JPY was up by 30 pips (+0.42%) to 73.23


The euro barely lost out to the Kiwi and had to content itself with second place.

The euro was likely feeding off the Greenback’s weakness at first since the euro began making its way higher without any direct catalysts.

However, demand for the euro may have then be sustained because of easing Italy-related jitters after top Italian government officials reassured investors. That rumor about the CSU may have also helped in sending the euro higher.

EUR/USD was up by 16 pips (+0.13%) to 1.1579, EUR/JPY was up by 36 pips (+0.28%) to 129.22, EUR/CHF was up by 18 pips (+0.16%) to 1.1287


All the safe-haven currencies (USD, JPY, CHF) were losers during the session, likely because of easing risk aversion. And among them, it was the yen that was the biggest loser of them all.

USD/JPY was up by 15 pips (+0.14%) to 111.59, CAD/JPY was up by 22 pips (+0.26%) to 84.69, CHF/JPY was up by 14 pips (+0.13%) to 114.48


The pound was a net loser during the session, which is rather wonky since the U.K.’s services PMI report was actually better-than-expected.

The pound has been under bearish pressure since the London session even rolled around, though. And according to some market analysts that was due to Brexit-related jitters, although they didn’t really cite a catalyst.

GBP/USD was down by 10 pips (-0.08%) to 1.2820, GBP/CAD was down by 37 pips (-0.22%) to 1.6890, GBP/NZD was down by 72 pips (-0.37%) to 1.9531

Watch Out For:

  • 12:30 pm GMT: U.S. trade balance (-$50.0 expected vs. -$46.3B previous)
  • 12:30 pm GMT: Canada’s trade balance (-$1.0B expected vs. -$0.6B previous)
  • 12:30 pm GMT: Canada’s labor productivity (0.5% expected vs. -0.3% previous)
  • 1:20 pm GMT: St. Louis Fed President James Bullard is expected to speak
  • 2:00 pm GMT: BOC monetary policy statement (BOC expected to hold overnight rate steady at 1.50%)
  • 7:00 pm GMT: San Francisco Fed President John Williams has a speech
  • 8:00 pm GMT: Minneapolis Fed President Neel Kashkari will be speaking
  • NAFTA talks will resume later