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The Greenback pared its gains from earlier and was the worst-performing currency of the morning London session.

And the main beneficiaries of the Greenback’s weakness were apparently the Aussie and the Kiwi since they were respectively the top-performing and second top-performing currencies of the session.

Other than those three, the yen is also worth noting since it was the second worst-performing currency after the Greenback, likely because of rising bond yields and the risk-friendly vibes in Europe.

The pound is also worth highlighting since it had a strong start, but fumbled a bit when the U.K.’s retail sales report surprised to the downside. However, follow-through buying was ever-present, but late sellers eventually joined the fray, likely because of tweets from a couple of political editors of British newspapers. And so the pound closed out the session in third-to-last place.

  • Swiss trade balance: CHF 2.43B vs. CHF 2.45B expected, CHF 2.08B previous
  • German WPI m/m: 0.4% as expected vs. 0.3% previous
  • U.K. retail sales m/m: -0.8% vs. -0.4% expected, 0.4% previous

Major Events/Reports:

U.K. retail sales report

The U.K.’s retail sales report for the September period was released earlier. And it revealed that headline retail sales volume in the U.K. contracted by 0.8% month-on-month. This is bad enough, but it gets worse since the market was only expecting a 0.4% contraction.

But on a slightly upbeat note, the previous reading was upgraded from +0.3% to +0.4%.

And a closer look at the details show that the slump was due mainly to the 1.5% slump in retail sales volume from predominantly food stores, which is the biggest decline since October 2015.

The annual headline reading, meanwhile, came in at +3.0%. This is slower compared to the previous month’s 3.4% annual increase, and is also contrary to expectations that retail sales will increase by 3.6% year-on-year.

Despite the disappointing readings for September, total retail sales volume is still 1.2% higher in Q3 compared to Q2. And that means that consumer spending will likely have a larger contribution to Q3 GDP growth.

Some Brexit-related updates

There were a bunch of Brexit-related headlines during the session. And focusing only on the more interesting and/or market-moving ones, first up is Brexit Secretary Raab’s statement that “The Prime Minister has the cabinet’s full support.”

That statement was a reply during a Sky News interview wherein Raab was asked about British PM Theresa May’s openness to extending the two-year transition period by a year.

Next, a Reuters report cited a “senior British government official” as saying that an extension of the transition period “is at a very early point, I think the key issue here is that we wouldn’t intend ever for this extension period to be used.”

After that, Theresa May’s spokeswoman had some press time and delivered her boss’ message that the U.K. is supposedly looking at other ways to push Brexit talks forward.

The spokeswoman was asked about May’s openness to an extension of the transition period and she replied that “It’s an idea at this stage, and there are others” without really elaborating on what ideas the U.K. government is looking at to push Brexit talks forward.

Gordon Rayner, political editor of The Daily Telegraph, then had these series of tweets:

And finally, Tom Newton Dunn, political editor of The Sun, tweeted the following:

Mild risk-taking in Europe

The major European equity indices were slightly but broadly higher during the session, so risk appetite was apparently the more dominant sentiment in Europe.

And market analysts say that the risk-friendly vibes in Europe were due to positive earnings results for European companies.

However, those same market analysts also said that gains were capped because of higher Fed rate hike expectations and the ongoing trade war between the U.S. and China.

  • The pan-European FTSEurofirst 300 was up by 0.17% to 1,429.60
  • Germany’s DAX was up by 0.13% to 11,730.16
  • The blue-chip Euro Stoxx 50 was up by 0.05% to 3,244.65

Will risk aversion return?

Despite the modest risk-taking in Europe, U.S. equity futures were down in the dumps, which implies that risk aversion may return during the upcoming U.S. session.

  • S&P 500 futures were down by 0.37% to 2,805.75
  • Nasdaq futures were down by 0.47% to 7,278.75

Major Market Mover(s):

USD

U.S. bond yields were on the rise during the session, but the Greenback was still forced to pare its gains across the board.

There were no apparent catalysts, and market analysts were only stating the obvious that the Greenback’s rise has stalled. However, it’s possible that the demand for the Greenback may have been dented because U.S. equity futures were broadly lower during the session.

USD/JPY was down by 4 pips (-0.04%) to 112.45, USD/CHF was down by 14 pips (-0.14%) to 0.9938, USD/CAD was down by 6 pips (-0.05%) to 1.3045

AUD & NZD

The Greenback’s weakness and the prevalence of risk appetite very likely helped to drive up demand for the Aussie and Kiwi.

AUD/USD was up by 25 pips (+0.36%) to 0.7143, AUD/CHF was up by 15 pips (+0.22%) to 0.7100, AUD/JPY was up by 27 pips (+0.34%) to 80.34

NZD/USD was up by 24 pips (+0.35%) to 0.6572, NZD/CHF was up by 13 pips (+0.21%) to 0.6532, NZD/JPY was up by 25 pips (+0.34%) to 73.92

Watch Out For:

  • 12:30 pm GMT: ADP’s Canadian non-farm employment change (13.6K previous)
  • 12:30 pm GMT: U.S. initial jobless claims (212K expected vs. 214K previous)
  • 12:30 pm GMT: Philadelphia Fed manufacturing survey (20.0 expected vs. 22.9 previous)
  • 2:00 pm GMT: CB’s U.S. leading index (0.5% expected vs. 0.4% previous)
  • 4:15 pm GMT: U.S. Fed Governor Randal Quarles is scheduled to speak
  • 9:45 pm GMT: Visitor arrivals in New Zealand (2.8% previous)