Plenty of themes were playing out during today’s morning London session. And the most notable theme is demand for the Aussie and the Kiwi despite the skittish risk sentiment in Europe.
That’s right. The Aussie and the Kiwi overpowered the yen and the Swissy, probably because the Greenback was on the back foot ahead of the U.S. midterm elections.
The Greenback wasn’t the weakest currency of the session, though, since that (dis)honor goes to the Loonie, likely because of the slide in oil prices.
And while the pound was mixed for the session, the pound is also noteworthy since it was the weakest currency for most of the session, but caught a bid late into the session, allowing the pound to pare its losses and close out the session mixed but a net winner.
The euro is also worth highlighting since it took hits when European Economic Commissioner Pierre Moscovici warned that the E.U. will impose sanctions on Italy if the Italian government won’t revise the budget.
- German factory orders m/m: 0.3% vs. -0.5% expected, 2.5% previous
- Spanish services PMI: 54.0 vs. 51.9 expected, 52.5 previous
- Italian services PMI: 49.2 vs. 52.1 expected, 53.3 previous
- French final services PMI: 55.3 vs. no change from 55.6 expected
- German final services PMI: 54.7 vs. no change from 53.6 expected
- Euro Zone final services PMI: 53.7 vs. no change from 53.3 expected
- Euro Zone PPI m/m: 0.5% vs. 0.4% expected, 0.4% previous
There were a few Brexit-related headlines during the session. And focusing only on the most interesting and/or market-moving ones, first up is British Trade Minister Liam Fox’s comments during a Reuters interview that it’s “impossible” to say if a Brexit deal can be hammered out by this month or next.
Fox did try to sound more optimistic when he quickly added that:
“But the prime minister says we are 95 percent there. We want to close that gap. We want there to be an agreement. We have always said it is better to have a deal than no deal.”
However, Fox took that optimistic message back when he went on to say that:
“[T]he quicker we get [an] agreement the better, but in the end it is more important to get the right agreement than the quickest agreement.”
Another downbeat news is the following tweet from DUP MP Jeffrey Donaldson:
Looks like we’re heading for no deal. Such an outcome will have serious consequences for economy of Irish Republic. In addition, UK won’t have to pay a penny more to EU, which means big increase for Dublin. Can’t understand why Irish Government seems so intent on this course. https://t.co/1L4WF1n85N
— Jeffrey Donaldson MP (@J_Donaldson_MP) November 6, 2018
Fortunately (for GBP bulls), BBC Political Editor Laura Kuenssberg tweeted the following late into the session.
‘Thumbs up’ – says Raab on his way out of cabinet
— Laura Kuenssberg (@bbclaurak) November 6, 2018
And to give that tweet some context, Brexit Secretary Raab was meeting with British PM Theresa May in order to try and iron out a solution to the persistent Irish border issue.
And apparently, that tweet was interpreted by the market as a sign that some progress was made.
Moscovici speaks (against Italy’s budget)
European Economic Commissioner Pierre Moscovici got some press time earlier during the session.
And, well, Moscovici demanded that:
“On the 13th of November we expect a strong, precise answer from the Italian government.”
Moscovici also warned that there will be consequences if Italy will refuse to cooperate:
“I want a dialogue, but sanctions can be finally applied if we cannot reach an agreement.”
Oil benchmarks were broadly lower during the morning London session. And market analysts say that the slide in oil prices was due to the waivers granted by the U.S. to some of Iran’s major oil buyers.
- U.S. WTI crude oil is down by 0.41% to $62.84
- Brent crude oil is down by 0.62% to $72.72
Risk-off vibes in Europe
Risk aversion was apparently the dominant sentiment in Europe since most of the major European equity indices were taking hits during the course of the session and were broadly in negative territory by the end of the session.
And according to market analysts, the risk-off vibes in Europe were due to disappointing earnings results, as well as skittishness ahead of the U.S. midterm elections.
- The pan-European FTSEurofirst 300 was up down 0.27% to 1,425.33
- Germany’s DAX was down by 0.29% to 11,461.93
- The blue-chip Euro Stoxx 50 was down by 0.30% to 3,207.65
Major Market Mover(s):
NZD & AUD
The Kiwi and the Aussie were respectively the top-performing and second top-performing currencies of the morning London session. But for the day so far, the Aussie is still currently on top, with the Kiwi in second place.
Oddly enough, risk aversion was the dominant sentiment in Europe. The Greenback was broadly lower ahead of the U.S. midterm elections, though, so the Aussie and the Kiwi may have just been feeding off the Greenback’s weakness.
NZD/USD was up by 16 pips (+0.24%) to 0.6678, NZD/CHF was up by 12 pips (+0.18%) to 0.6700, NZD/CAD was up by 26 pips (+0.30%) to 0.8763
AUD/USD was up by 13 pips (+0.19%) to 0.7236, AUD/CHF was up by 9 pips (+0.13%) to 0.7260, AUD/CAD was up by 24 pips (+0.25%) to 0.9495
The Loonie was the biggest loser of the morning London session, likely because CAD pairs were dragged down by the falling oil prices.
USD/CAD was up by 9 pips (+0.07) to% 1.3122, GBP/CAD was up by 16 pips (+0.09%) to 1.7157, EUR/CAD was up by 14 pips (+0.09%) to 1.4980
The pound was mixed for the session, but GBP pairs were the most volatile and had roughly uniform, two-way price action, so the pound is worth highlighting.
With that said, the pound was hammered by selling pressure when Trade Minister Liam Fox was interviewed. And more sellers would later come out to torment the pound when DUP MP Jeffrey Donaldson sent out that tweet.
However, the pound was bid higher across the board later on when BBC Political Editor Laura Kuenssberg sent out that tweet about Brexit Secretary Raab, which likely revived hopes for a Brexit deal.
GBP/USD was up by 2 pips (+0.02%) to 1.3074 but hit a session low of 1.3053, GBP/JPY was down by 18 pips (-0.12%) to 147.97 but hit a session low of 147.30, GBP/CHF was down by 6 pips (-0.05%) to 1.3117 but hit a session low of 1.3083
Watch Out For:
- 1:30 pm GMT: Canadian building permits (0.3% expected vs. 0.4% previous)
- 3:00 pm GMT: U.S. JOLTS job openings (7.09M expected vs. 7.14M previous)
- 9:30 pm GMT: AIG’s Australian construction index (49.3 previous)
- 9:45 pm GMT: New Zealand’s jobless rate (4.4% expected vs. 4.5% previous), quarterly employment change (0.5% expected, same as previous), and labor cost index (0.5% expected vs. 0.6% previous)
- Dairy auction currently underway (-0.3% previous); auction usually ends at around 2:00 pm GMT
- U.S. midterm elections today