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The pound was the top-performing currency of the morning London session yet again, thanks to growing hopes for a Brexit deal.

The euro, meanwhile extended its gains from the earlier  session, but was kicked lower across the board when ECB Chief Economist Peter Praet tried to play down ECB Overlord Draghi’s comments from yesterday.

Dip demand for the euro was quite notable, though, and the euro quickly recovered its losses to finish the session in second place.

Other than those two, the Greenback and the Loonie are also noteworthy since they were the biggest losers of the session.

  • German WPI m/m: 0.3% vs. 0.2% expected, 0.1% previous
  • French business survey: 107.0 vs. 109.0 expected, 110.0 previous
  • Spanish PPI y/y: 5.2% expected vs. 4.6% previous

Major Events/Reports:

ECB’s Praet speaks

ECB Chief Economist Peter Praet gave a presser earlier. And when he was asked about ECB Overlord Draghi’s comment that there will be a “relatively vigorous” pick up in underlying inflation, Praet just shrugged that comment off, saying that “There was nothing new.”

Praet then presented a more cautious tone when he said that (emphasis mine):

“Clearly, we see progress in underlying [inflation], what is behind the inflation process. But it’s a long process and conditioned on very easy monetary condition.”

BOJ’s Kuroda speaks

BOJ Shogun Kuroda gave a speech in Osaka earlier during the session. And he basically repeated the BOJ’s message that the super loose monetary policy won’t be changing for an “extended period” because of Japan’s low inflation.

However, Kuroda also implied that the BOJ has a tightening bias when he said that (emphasis mine):

“We hope to achieve 2 percent inflation at the earliest date possible by maintaining our powerful monetary easing, so that we can begin normalizing monetary policy.”

BOE’s Vlieghe speaks

Earlier today, BOE MPC Member Vieghe delivered a speech at Imperial College Business School in London.

His actual speech didn’t really present anything new. However, Vleighe was asked about his own personal views on the BOE’s monetary policy during the Q&A portion.

And Vleighe simply reiterated that his views are unchanged, so he thinks that one or two rate hikes per year would probably be the right way to go.

Vlieghe was also asked about what he thinks about Brexit. And Vlieghe answered that the BOE as a whole is still holding on to its baseline scenario that the U.K. will leave the E.U. with a deal.

However, Vlieghe also said that the BOE is open to changing its view on Brexit when he said that:

“And I do think that that’s still the right approach until we are much further in the negotiations and actually it becomes clear what by far the most plausible of these paths [will be]. And I just think right now we’re not at that point, but when we are at that point, then we will likely change [this view].”

Trump tweets (about Iran)

I’ll just leave this here…

Risk appetite revived in Europe

After yesterday’s downbeat start, risk appetite got revived during today’s morning London session, sending the major European equity indices broadly higher.

And according to market analysts, the risk-friendly vibes in Europe were due to higher U.S. oil prices, which pushed energy shares higher, as well as growing optimism that Italy will play nice and follow the E.U.’s budget rules.

  • The pan-European FTSEurofirst 300 was up by 0.46% to 1,504.36
  • Germany’s DAX was up by 0.27% to 12,384.55
  • The blue-chip Euro Stoxx 50 was up by 0.33% to 3,420.95

Major Market Mover(s):

GBP

The pound was the top-performing currency of the morning London session (yet again) and is also the best-performing currency of the day (yet again).

BOE’s Vlieghe had some positive things to say, but Vlieghe gave his speech at the middle of the session, while the pound found buyers right from the get-go.

And according to market analysts, the pound enjoyed another round of buying because of growing hopes for the Brexit deal, and they’re still citing Raab’s comments from yesterday’s morning London session.

GBP/USD was up by 55 pips (+0.42%) to 1.3163, GBP/JPY was up by 49 pips (+0.33%) to 148.49, GBP/CAD was up by 74 pips (+0.44%) to 1.7052

EUR

Like yesterday, the euro finished the session in second place and also happens to be the second top-performing currency of the day (so far).

The euro actually began moving higher a few hours before the morning London session rolled around, apparently because of a La Stampa report claiming that the Italian government is ready to compromise by having a budget deficit of only 1.9% of GDP (E.U.’s limit is 3%).

The euro then proceeded to move even higher (except against GBP) when the session finally rolled around, but got gutted when ECB Chief Economist Peter Praet spoke.

Dip demand was rather strong, though, and so the euro quickly recovered from the drop and then closed out the session in second place.

It’s not very clear what caused the euro to quickly recover, but optimism that Italy will play nice with the E.U. is a likely reason since the rally in European equity indices is partially attributed to Italy-related hopes.

Another likely reason is improved expectations for an ECB rate hike since market analysts point out that market players have already fully priced-in a September 2019 ECB rate hike.

EUR/USD was up by 20 pips (+0.17%) to 1.1781 after hitting a session low of 1.1733, EUR/JPY was up by 12 pips (+0.10%) to 132.90 after hitting a session low of 132.46, EUR/CAD was up by 30 pips (+0.20%) to 1.5262 after hitting a session low of 1.5219

CAD

The Loonie was the weakest currency of the session. There were no direct catalysts, but the Loonie appears to have been hit by selling pressure after oil benchmarks pared their gains when Trump tweeted that he has no plans to meet with Iran’s Rouhani.

USD/CAD was up by 3 pips (+0.02%) to 1.2955, AUD/CAD was up by 7 pips (+0.08%) to 0.9398, NZD/CAD was up by 11 pips (+0.12%) to 0.8619

Watch Out For:

  • 1:00 pm GMT: U.S. HPI (0.2% expected, same as previous)
  • 1:00 pm GMT: S&P/CS composite U.S. HPI (6.2% expected vs. 6.3% previous)
  • 2:00 pm GMT: CB’s consumer confidence (132.2 expected vs. 133.4 previous)
  • 2:00 pm GMT: Richmond Fed’s manufacturing index (22 expected vs. 24 previous)