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After taking a beating during the earlier Asian session, the Aussie and the Kiwi had a good run during the session. Heck, the Aussie was even able to claim the top spot of the morning London session and is now a net winner for the day (so far).

And Aussie and Kiwi bulls can probably thank the risk-friendly vibes in Europe for that, as well as rising commodity prices and the Greenback’s tumble at the start of the session.

The pound, meanwhile, was the biggest loser. The pound was actually mixed at first since it won out against the safe-havens and the euro but lost ground against the comdolls.

However, the pound was hit by late selling pressure. And there were apparently enough sellers to wipe out the pound’s gains against the safe-havens and the euro, forcing the pound to limp to the finish line in last place.

And while the euro was mixed for the session, it’s worth highlighting since it initially had a promising start, likely because of the Greenback’s weakness. However, it began to find sellers after an ECB-related rumor made the rounds at around 8:40 am GMT.

  • Italian industrial production m/m: -1.8% vs. -0.4% expected, 0.3% previous
  • Italian industrial production y/y: -1.3% vs. 1.4% expected, same as previous
  • Chinese new yuan loans: 1,280B vs. 1,350B expected, 1,450B previous
  • Euro Zone industrial production m/m: -0.8% vs. -0.5% expected, -0.8% previous
  • Euro Zone industrial production y/y: 8.2% vs. 8.5% expected, same as previous
  • Italian quarterly jobless rate: 10.7% vs. 10.8% expected, 11.0% previous

Major Events/Reports:

ECB-related rumor

According to a Bloomberg report, unnamed “officials familiar with the [ECB’s] latest projections” claim that the ECB will announce a downgrade for its Euro Zone growth forecasts tomorrow, with trade-related concerns being cited as the reason for the bleaker outlook.

Moreover, the ECB may also change the language for its growth outlook from “broadly balanced” to signal an increase in downside risks.

However, the unnamed officials were also cited as saying that the ECB’s inflation projections are supposedly “largely unchanged” as the Bloomberg report puts it.

Brexit-related rumor

The BBC released a report early on, claiming that 50 members of the European Research Group, a pro-Brexit Conservative party research group, have supposedly discussed “how best you game the leadership election rules,” apparently in order to oust Theresa May from the British PM position.

An unnamed Conservative Party MP who was present at these discussions was also cited as saying that the group discussed “possible scenarios over the Autumn,” adding that “everyone I know says she has to go.”

The BBC report also cited another unnamed source as saying that “people feel the leadership is out of touch and has lost the plot.”

Juncker speaks

European Commission President Jean-Claude Juncker gave a speech a little over an hour after the BBC report was released. And he had this positive thing to say about the U.K.:

“The United Kingdom will never be an ordinary third country for us. The United Kingdom will always be a very close neighbour and partner in political, economic and security terms.”

However, he also took jabs at Theresa May’s Brexit proposals, particularly with regard to their future economic relationship.

“But we also ask the British government to understand that someone who leaves the union cannot be in the same privileged position as a member state.”

“If you leave the union, you are of course no longer part of our single market, and certainly not only in the parts of it you choose.”

Juncker also reiterated the E.U.’s position that the Irish border issue is a major sticking point that the E.U. refuses to budge on:

“The European commission, this parliament and all other 26 member states will always show loyalty and solidarity with Ireland when it comes to the Irish border.”

Davis speaks

Former Brexit Secretary David Davis was interviewed by the Evening Standard late into the session and after Juncker gave his speech.

And referring to Juncker’s statements which rejected Theresa May’s proposals (a.k.a. “Chequers” proposal), Davis explained that:

“It was precisely for this response that I instructed the [Brexit Department] to prepare the alternative free trade-plus deal to be ready to go if Chequers does not fly.”

Sentiment flips back to risk-on in Europe

The major European equity indices had a wobbly start but they soon regained their footing and began marching slowly but broadly higher, so risk-taking was apparently the dominant sentiment in Europe.

And market analysts say that the major European equity indices were taking cues from rising commodity prices since mining and energy shares were the biggest winners, although deal-making activity was also cited as another reason for the risk-friendly vibes in Europe.

Trade-related jitters were still likely weighing down on sentiment, though, since most of the major European equity indices slowly trimmed some of their gains near the end.

  • The pan-European FTSEurofirst 300 was up by 0.23% to 1,469.35
  • Germany’s DAX was up by 0.22% to 11,997.16
  • The blue-chip Euro Stoxx 50 was up by 0.16% to 3,315.75

Major Market Mover(s):

GBP

GBP pairs (except GBP/AUD) jumped higher at the start of the session. And market analysts attributed that to Juncker’s comment that the U.K. “will never be an ordinary third country.”

There was little follow-through buying, however, since Juncker also said some not-too-friendly things. And so the pound’s price action became mixed after that.

And the pound was headed for a mixed finish at first. However, sellers rushed the pound at around 10:00 pm GMT, so the apparent catalyst was David Davis’ interview with the Evening Standard.

Some market analysts also cited the BBC report about plans to oust Theresa May, but that report was released at around 6:00 pm GMT, so I’m not too sure about that.

GBP/USD was down by 5 pips (-0.04%) to 1.2998 but reached an intraday high of 1.3047 earlier, GBP/JPY was down by 9 pips (-0.06%) to 144.91 but reached an intraday high of 145.42 earlier, GBP/AUD was down by 41 pips (-0.23%) to 1.8270 but reached an intraday high of 1.8322 earlier

AUD

The higher-yielding Aussie was the biggest winner of the morning London session, likely because of the risk-friendly vibes, rising commodity prices, and the Greenback’s weakness at the start of the session.

The Aussie did pare some of its gains when signs of risk aversion returned later on. Even so, it managed to hold onto most of its gains and is now even a net winner for the day (so far).

AUD/USD was up by 18 pips (+0.26%) to 0.7115, AUD/JPY was up by 16 pips (+0.21%) to 79.32, AUD/CHF was up by 15 pips (+0.22%) to 0.6927

Watch Out For:

  • 12:30 pm GMT: Canadian capacity utilization rate (86.9% expected vs. 86.1% previous)
  • 12:30 pm GMT: U.S. headline (0.2% expected vs. 0.0% previous) and core (0.2% expected vs. 0.1% previous) readings for U.S. PPI
  • 2:30 pm GMT: U.S. crude oil inventories (-1.3M expected vs. -4.3M previous)
  • 4:45 pm GMT: U.S. Fed Governor Lael Brainard is scheduled to speak
  • 6:00 pm GMT: U.S. Fed’s “Beige Book” will be released
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