Price action was a bit choppy during today’s morning London session and trading conditions were relatively tight for the most part .
Having said that, the yen continued to attract buyers, thanks to the risk-off vibes. The yen wan’t the one currency to rule them all, though, since the pound got a bullish volatility infusion near the end (thanks to a Brexit-related rumor) which allowed the pound to steamroll all its forex rivals.
The Loonie, meanwhile, was the biggest loser of the session, very likely because it was dragged lower by falling oil prices.
- German PPI m/m: 0.5% vs. 0.3% expected, same as previous
- CBI’s U.K. industrial order expectations: -6 vs. -1 expected, same as previous
- E.U. expected to rule on Italy’s budget later today
According to E.U. sources cited in a report from RTE News, the E.U. will supposedly “offer British Prime Theresa May a UK-wide customs union as a way around the Irish backstop issue.”
It’s worth pointing out, however, that the report also noted that such an offer would have to be negotiated separately.
No challenge against British PM (for now)
Tom Newton Dunn, the political editor of The Sun, as well as Laura Kuenssberg, BBC political editor, tweeted the following comments earlier, so a leadership challenge against Theresa May doesn’t seem imminent … for now at least.
48 letter threshold has NOT been reached yet I m told – for now
— Laura Kuenssberg (@bbclaurak) October 23, 2018
1922 Chairman Sir Graham Brady has told friends "he has no plans to go to No10 today" and is going about his normal business. Stand down folks (for now at least).
— Tom Newton Dunn (@tnewtondunn) October 23, 2018
Commodities sink but precious metals shine
Most commodities were taking hits during the morning London session. Not all commodities were in the red, though, since precious metals were actually in demand and well in the green.
Market analysts couldn’t pinpoint the reason for the slide in commodity prices.
And we can’t really pin the blame on the Greenback since the buck was mixed during the session but is currently a net loser for the day. And for reference, the U.S. dollar index was down by 0.12% to 95.63 for the day by the end of the session.
However, market analysts blamed the poor demand for base metals, such as copper, on China-related worries. That makes sense since China is the largest consumer of industrial metals.
The slide in oil prices, meanwhile, was blamed by market analysts on Saudi Energy Minister Khalid al-Falih’s comment that, despite the political rift between the U.S. and Saudi Arabia, Saudi Arabia is ready to increase oil output once sanctions against Iran cause oil supply to dwindle.
As to why precious metals were in demand, that’s likely because of safe-haven demand due to all the geopolitical risks.
Oil benchmarks were down in the dumps.
- U.S. WTI crude oil is up by 1.13% to $68.39
- Brent crude oil is up by 1.63% to $78.53
Base metals were actually mixed but most were in the red.
- Copper was up by 0.40% to $2.763 per pound
- Nickel was up by 0.48% to $12,390.00 per dry metric ton
As mentioned earlier, precious metals went against the bearish tide.
- Gold was up by 1.32% to $1,237.30 per troy ounce
- Silver was up by 0.64% to $14.750 per troy ounce
Risk aversion strikes back
Risk aversion made a strong comeback during today’s morning London session since the major European equity indices opened broadly lower and then plumbed fresh intraday lows as the session progressed before finally recovering a bit near the end of the session.
And according to market analysts, the feelings of doom and gloom were due to disappointing earnings results, as well as a host of geopolitical risks, which include Brexit, Italy’s budget, the ongoing trade war between the U.S. and China, as well as the political rift between the U.S. and Saudi Arabia.
- The pan-European FTSEurofirst 300 was down by 1.25% to 1,397.97
- Germany’s DAX was down by 0.83% to 6,984.17
- The blue-chip Euro Stoxx 50 was down by 1.13% 3,154.65
U.S. equity futures were already down in the dumps, so the risk-off vibes may carry over into the upcoming U.S. session.
- S&P 500 futures were down by 1.29% to 2,721.00
- Nasdaq futures were down by 1.50% to 7,048.25
Major Market Mover(s):
The pound got a soft lift from the get-go, probably because of short-covering, although news that a leadership challenge against the British PM not having materialized may have also sustained demand for the pound.
However, what really caused the pound to surge higher across the board was that rumor that the E.U. is supposedly ready to offer a “ a UK-wide customs union” in order to finally resolve the Irish border issue.
GBP/USD was up by 54 pips (+0.42%) to 1.3027, GBP/CAD was up by 85 pips (+0.50%) to 1.7072, GBP/AUD was up by 92 pips (+0.49%) to 1.8437
The yen was in demand during the session, very likely because of safe-haven demand for the yen.
And interestingly enough, the yen initially had a slight advantage against the pound. But, well, the pound surge higher across the board late into the session, which left the yen eating dust.
The yen still finished the session in second place, though.
USD/JPY was down by 9 pips (-0.08%) to 112.26, AUD/JPY was down by 14 pips (-0.16%) to 79.32, CAD/JPY was down by 14 pips (-0.17%) to 85.66
All the comdolls (CAD, NZD, AUD) were feeling a bit under the weather during the session. However, the Loonie suffered the most and was the biggest loser of the session.
There were no apparent catalysts for the Loonie’s weakness, but it looks like the Loonie was dragged lower by sliding oil prices. It’s also possible that market players were gearing up for the BOC statement.
Speaking of the upcoming BOC statement, y’all may wanna check out Forex Gump’s write-up on that.
USD/CAD was up by 10 pips (+0.08%) to 1.3105, NZD/CAD was up by 7 pips (+0.09%) to 0.8587, EUR/CAD was up by 30 pips (+0.20%) to 1.5043
Watch Out For:
- 1:30 pm GMT: Minneapolis Fed President Neel Kashkari will give a speech
- 2:00 pm GMT: Euro Zone consumer confidence (-3.2 expected vs. -2.9 previous)
- 2:00 pm GMT: Richmond Fed’s manufacturing index (25 expected vs. 29 previous)
- 3:20 pm GMT: BOE Guv’nah Carney is scheduled to speak
- 5:30 pm GMT: Atlanta Fed President Raphael Bostic has a speech
- E.U. expected to rule on Italy’s budget later (E.U. will likely reject Italy’s budget)