There wasn’t much on the docket during the morning London session, but that doesn’t mean that the session was totally devoid of action, since the higher-yielding comdolls and the safe-haven currencies were fighting it out.
Risk-taking prevailed at the start, so the higher-yielding Aussie and Kiwi had the initial advantage, while the safe-havens yen and Swissy were on the receiving end of a beat-down.
However, the tables were later turned when appetite for risk began to fade. And in the end, the safe-havens were the ones dishing out the pain against the higher-yielders.
Aside from the battle between the higher-yielders and the safe-havens, the euro is also worth noting since it had a promising start but began to encounter sellers after Smets’ comments and closed out the session as a net loser.
The pound is also noteworthy since it was rushed by sellers late into the session, apparently because of a Financial Times report.
- Italian final HICP m/m: -0.2% vs. no change from -0.1% expected
- Italian final HICP y/y: 1.6% vs. no change from 1.7% expected
- Euro Zone trade balance: €12.8B vs. €16.3B expected, €16.5B previous
- U.S. retail sales report coming up
ECB Member and Belgian Central Bank Governor Jan Smets was speaking earlier and he touched upon the ECB’s language during yesterday’s ECB statement and presser.
As for specifics, Smets stressed that normalizing the ECB’s monetary policy would be a “very gradual process.”
“We reiterated the forward guidance on the reinvestment and on policy rates, implying that we do foresee a very gradual process of policy normalization.”
And he basically reiterated the ECB’s position that it (the ECB) doesn’t want to tighten monetary policy too quickly to because:
“That will allow financing conditions to remain very favorable and to support both the economy and the associated reflationary process we are aiming for.”
According to a Financial Times report that was released late into the sesion, Emily Thornberry, a Labour MP and Shadow Foreign & Commonwealth Secretary, reportedly said that a workable Brexit deal was “just not going to happen” under Bitish PM Theresa May’s leadership.
The report also quoted Thornberry as saying that Labour will vote against any Brexit deal. And that will supposedly oust Theresa May from the PM position before Christmas.
Fading appetite for risk in Europe
The major European equity indices opened higher and then climbed even higher, which is a sign that risk-taking was the name of the game in Europe.
However, the major European equity indices later began to encounter broad-based selling pressure, forcing them off their respective intraday highs.
Market analysts attributed the risk-on vibes to trade-related optimism, as well as the Apple-inspired demand for tech shares.
As for the later signs of fading appetite for risk, market analysts only noted that the major European equity indices pared their gains, but couldn’t really pinpoint a catalyst.
- The pan-European FTSEurofirst 300 was up by 0.12% to 1,473.98 but off the day’s high at 1,478.81
- Germany’s DAX was up by 0.22% to 12,082.48 but off the day’s high at 12,133.61
- The blue-chip Euro Stoxx 50 was up by 0.03% to 3,336.05 but off the day’s high at 3,351.85
Major Market Mover(s):
CHF & JPY
The Swissy and the yen were the top-performing currencies during the session, apparently because of the fading appetite for risk. There can only be one champion, though, and that happened to be the Swissy.
USD/CHF was down by 6 pips (-0.07%) to 0.9646, EUR/CHF was down by 24 pips (-0.22%) to 1.1275, GBP/CHF was down by 36 pips (-0.29%) to 1.2625
USD/JPY was down by 6 pips (-0.06%) to 111.85, EUR/JPY was down by 27 pips (-0.21%) to 130.73, GBP/JPY was down by 41 pips (-0.28%) to 146.38
AUD & NZD
Both the Aussie and Kiwi showed promise when the morning London session rolled around.
Sadly for the two higher-yielding comdolls, risk appetite began to sour, so both currencies were forced to give back some of their gains from the earlier session and were the biggest losers of the morning London session to boot.
AUD/USD was down by 18 pips (-0.25%) to 0.7187, AUD/CHF was down by 21 pips (-0.30%) to 0.6934, AUD/JPY was down by 24 pips (-0.30%) to 80.39
NZD/USD was down by 13 pips (-0.20%) to 0.6573, NZD/CHF was down by 17 pips (-0.27%) to 0.6340, NZD/JPY was down by 19 pips (-0.26%) to 73.52
Watch Out For:
- 12:30 pm GMT: Headline (0.4% expected vs. 0.5% previous) and core (0.5% expected vs. 0.6% previous) readings for U.S. retail sales; read Forex Gump’s Event Preview
- 12:30 pm GMT: U.S. import prices (-0.2% expected vs. 0.0% previous)
- 1:15 pm GMT: U.S. industrial production (0.3% expected vs. 0.1% previous)
- 1:15 pm GMT: U.S. capacity utilization rate (78.2% expected vs. 78.1% previous)
- 2:00 pm GMT: University of Michigan’s preliminary consumer sentiment (96.6 expected vs. 96.2 previous)
- 2:00 pm GMT: U.S. business inventories (0.6% expected vs. 0.1% previous)