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The Greenback and the yen fought for the top-spot during the morning London session, with the Greenback ultimately coming out on top.

The pound, meanwhile, was rushed by sellers when the morning London session rolled around. And when the U.K.’s inflation report failed to impress, more bears came out of the woods to maul the pound.

The pound’s not the only major loser of the session, however, since the Kiwi was also feeling the pain, very likely because risk aversion made a comeback during the morning London session.

  • New yuan loans in China: 1,380B vs. 1,355B expected, 1,280B previous
  • U.K. CPI m/m: 0.1% vs. 0.2% expected, 0.7% previous
  • U.K. CPI y/y: 2.4% vs. 2.6% expected, 2.7% previous
  • Core U.K. CPI y/y: 1.9% vs. 2.0% expected, 2.1% previous
  • HPI in the U.K. y/y: 3.2% vs. 3.5% expected, 3.4% previous
  • U.K. PPI input m/m: 1.3% vs. 0.9% expected, 1.2% previous
  • U.K. PPI output m/m: 0.4% vs. 0.2% expected, same as previous
  • Euro Zone final HIPC: unchanged at 2.1% as expected
  • Euro Zone final core HIPC: unchanged at 0.9% as expected

Major Events/Reports:

U.K. CPI report

The Office for National Statistics (ONS) released the U.K.’s latest CPI report earlier.

And according to the report, headline CPI increased by 0.1% month-on-month, missing expectations for a 0.2% monthly increase.

Year-on-year, CPI weakened from a six-month high of 2.7% to a three-month low by 2.4%.

This is made even worse since the market was only expecting the annual reading to decelerate to 2.6%.

Despite the miss, the 2.4% reading actually meets the BOE’s own forecast that CPI will increase by 2.4% year-on-year in September, as laid out in the BOE’s August 2018 Inflation Report.

A closer look at the details of CPI report also shows that the weaker annual reading was mainly due to the slower increase in the cost of food and non-alcoholic beverages (+1.5% vs. +2.5% previous).

Also, the weakness was not really broad-based since only 5 of the 12 CPI components printer weaker readings in September. As for the other CPI components, 4 printed stronger annual readings and the remaining 3 maintained the pace.

Skittish risk sentiment in Europe

The major European equity indices had a promising start, but it soon became apparent that risk aversion was the prevalent sentiment since the major European equity indices eventually pared their gains and most were already in negative territory by the end of the morning London session.

Market analysts couldn’t pinpoint the reason for the risk-off vibes in Europe, but they suggested that Brexit-related jitters because of the E.U. Summit and concerns surrounding Italy’s budget may be making investors wary of loading up on European stocks.

  • The pan-European FTSEurofirst 300 was down by 0.14% to 1,430.73
  • Germany’s DAX was down by 0.55% to 11,711.98
  • The blue-chip Euro Stoxx 50 was down by 0.12% to 3,252.65

U.S. equity futures were also feeling the heat.

  • S&P 500 futures were down by 0.21% to 2,811.75
  • Nasdaq futures were down by 0.31% to 7,330.75

U.S. bond yields higher

Despite the risk-off vibes in Europe, U.S. bonds yields rose during the morning London session, although they did begin to pare their gains near the end.

  • U.S. 30-year bond yield up by 0.16% to 3.336%
  • U.S. 10-year bond yield up by 0.10% to 3.164%
  • U.S. 5-year bond yield up by 0.05% to 3.026%
  • U.S. 2-year bond yield up by 0.04% to 2.873%

Major Market Mover(s):

USD & JPY

The Greenback and the yen battled for supremacy during the session, but the the Greenback (barely) won out in the end. The Greenback’s win against the yen also means that the Greenback is now the best-performing currency of the day (so far).

Interestingly enough, the yen actually had the advantage at first, likely because of the risk-off vibes. However, U.S. bond yields began to turn higher, which likely dented demand for the yen while boosting demand for the Greenback, giving the Greenback the winning edge.

USD/JPY was up by 2 pips (+0.02%) to 112.28, USD/CHF was up by 25 pips (+0.28%) to 0.9936, USD/CAD was up by 19 pips (+0.15%) to 1.2974

CHF/JPY was down by 32 pips (-0.28%) to 113.00, CAD/JPY was down by 11 pips (-0.13%) to 86.53, AUD/JPY was down by 22 pips (-0.28%) to 79.94

GBP

The pound got whupped when the morning London session even rolled around. And market analysts blamed that on profit-taking and/or preemptive positioning ahead of the U.K.’s CPI report.

And when the U.K.’s CPI report was revealed to be  a disappointment, the pound encountered even more sellers. Bulls did try to fight back, probably because the annual reading is still meeting the BOE’s expectations. However, bears eventually won out. And it probably didn’t help that the E.U. Summit will be starting soon.

GBP/USD was down by 82 pips (-0.62%) to 1.3107, GBP/CHF was down by 43 pips (-0.33%) to 1.3024, GBP/JPY was down by 89 pips (-0.61%) to 147.16

NZD

The Kiwi had a good run during the earlier session, but it was forced to return its gains (and then some) during the morning London session, thanks to the risk-off vibes and the Greenback’s strength.

NZD/USD was down by 33 pips (-0.51%) to 0.6559, NZD/CHF was down by 14 pips (-0.21%) to 0.6518, NZD/JPY was down by 36 pips (-0.49%) to 73.65

Watch Out For:

  • 12:30 pm GMT: Canadian manufacturing sales (-0.6% expected vs. 0.9% previous)
  • 12:30 pm GMT: U.S. building permits (1.27M expected vs. 1.25M previous) and U.S. housing starts (1.22M expected vs. 1.28M previous)
  • 1:30 pm GMT: CB’s U.K. leading index (-0.2% previous)
  • 2:30 pm GMT: U.S. crude oil inventories (1.6M expected vs. 6.0M previous)
  • 4:10 pm GMT: U.S. Fed Governor Lael Brainard will deliver a speech
  • 4:30 pm GMT: Deutsche Bundesbank President Jens Weidmann will be part of a panel discussion
  • 5:00 pm GMT: BOE MPC Member Ben Broadbent will take part in a panel discussion
  • 6:00 pm GMT: FOMC meeting minutes will be released
  • E.U. Summit later; read up on Forex Gump’s What to Expect from the EU Summit This Week.