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The European currencies were the top-performers of the morning London session, with the safe-haven Swissy in the lead, the pound in second place, and the euro in third place.

Demand for the Swissy was likely driven by safe-haven flows due to the risk-off vibes in Europe.

The pound, meanwhile, has been sliding since yesterday, but finally found some respite after the U.K.’s Q3 GDP report was released.

As for the euro, it jumped higher when Italian Economy Minister Tria spoke.

Other than those three currencies, the Loonie is also worth noting since it was the biggest loser of the session, likely because of falling oil prices.

  • French industrial production m/m: -1.8% vs. -0.3% expected, 0.2% previous
  • U.K. GDP m/m: 0.0% vs. 0.1% expected, same as previous
  • U.K. GDP q/q: 0.6% as expected vs. 0.4% previous
  • Construction output in the U.K. m/m: 1.7% vs. 0.2% expected, -0.7% previous
  • U.K. industrial production m/m: 0.0% vs. -0.1% expected, 0.0% previous
  • U.K. manufacturing production m/m: 0.2% vs. 0.1% expected, -0.1% previous
  • U.K. goods trade balance: -£9.7B vs. -£11.4B expected, -£11.2B previous

Major Events/Reports:

U.K. GDP report

The Office for National Statistics (ONS) released the U.K.’s latest GDP reports, together with a bunch of other economic reports during the session.

Most of the economic reports are actually just components of the GDP reports, so let’s focus only on the GDP reports.

With that said, the monthly GDP report was a disappointment since it revealed that GDP growth was flat month-on-month in September (+0.1% expected).

The quarterly GDP report, meanwhile, printed a 0.6% quarter-on-quarter growth, which is within the market’s expectations, as well as the BOE’s own expectations for a 0.6% increase, as reported in the August 2018 BOE Inflation Report.

As for the year-on-year reading, that came in at 1.5%, which is the strongest in four quarters, but is also within expectations.

A quick look at the report shows that private consumption and exports were strong, which is good. However, business investment continued to disappoint and slumped for the third consecutive quarter. That’s not too surprising, though, since Brexit-related uncertainty had been dissuading investors for some time now.

Anyhow, aside from the slide in business investment and the miss for the monthly GDP reading, the U.K.’s GDP report appears to be net positive overall.

Chancellor of the Exchequer Philip Hammond even tweeted the following:

Italy’s Tria speaks

Italian Economy Minister Giovanni Tria was speaking before the Italian Parliament earlier.

And he said that contrary to the E.U.’s forecast that Italy’s budget deficit will balloon to 2.9% in 2020, the Italian government is committed to keeping the deficit at the planned 2.4%.

Tria also justified the target 2.4% deficit while also noting that the budget deficit would have been bigger:

“We realise that the problems that have been revealed [by the slowdown in Italy’s economy] would require a more incisive expansive budget.”

However, Tria also stressed that Italy wants to play nice with the E.U. when he said that:

“But it was necessary to find the right balance between financial and social stability, both of which are needed.”

Commodities crushed

Almost all commodities were still bleeding out during the morning London session.

And it’s probably safe to blame the commodities rout on the Greenback’s rise since Wednesday.

And despite demand for the European currencies, the Greenback is also still broadly higher for the day. And for reference, the U.S. dollar index was up by 0.05% to 96.59 for the day when the session came to a close.

Aside from Greenback strength, market analysts were also saying that oil prices were under pressure because U.S. crude oil has entered a bear market.

Oil benchmarks got whupped.

  • U.S. WTI crude oil is down by 1.73% to $59.62
  • Brent crude oil is down by 1.63% to $69.50

Base metals were hammered down.

  • Copper was down by 1.46% to $2.697 per pound
  • Nickel was down by 1.62% to $11,585.00 per dry metric ton

Precious metals were also melting.

  • Gold was down by 0.58% to $1,219.10 per troy ounce
  • Silver was down by 1.53% to $14.305 per troy ounce

Risk-off ending in Europe

After a mostly risk-friendly week, Europe is closing out the week with some negative vibes since the major European equity indices were broadly in the red during the morning London session.

And market analysts were blaming the risk-off vibes in Europe on risk sentiment spillover because of higher rate hike expectations due to yesterday’s FOMC statement, which would mean potentially tighter credit conditions down the road.

Of course, it’s also possible that we’re just seeing some profit-taking. After all, risk appetite has been the dominant sentiment in Europe since last week.

  • The pan-European FTSEurofirst 300 was down by 0.80% to 1,430.16
  • Germany’s DAX was down by 0.75% to 11,441.17
  • The blue-chip Euro Stoxx 50 was down by 0.91% to 3,208.15

Major Market Mover(s):

CHF

The Swissy was the top-performing currency of the morning London session, likely because of safe-haven demand due to the risk-off vibes in Europe.

USD/CHF was down by 19 pips (-0.20%) to 1.0060, CAD/CHF was down by 17 pips (-0.23%) to 0.7625, GBP/CHF was down by 5 pips (-0.04%) to 1.3113

GBP

The pound initially extended its losses when the morning London session rolled around. However, the pound found support and even closed out the session in second place after the U.K.’s GDP report was released.

GBP/USD was up by 24 pips (+0.19%) to 1.3038, GBP/JPY was up by 30 pips (+0.20%) to 148.44, GBP/CAD was up by 33 pips (+0.20%) to 1.7197

EUR

The euro caught a bid when Tria was speaking before the Italian Parliament, probably because traders were happy to hear that Italy is committed to keeping next year’s deficit within 2.4% of GDP, contrary to the E.U.’s forecast that Italy’s deficit will balloon to 2.9%.

EUR/USD was up by 13 pips (+0.12%) to 1.1349, EUR/JPY was up by 17 pips (+0.12%) to 129.23, EUR/CAD was up by 18 pips (+0.13%) to 1.4969

CAD

The Loonie was the biggest loser of the morning London session, likely because of the slide in oil prices, although it’s also possible that a U.S. judge has blocked the Keystone XL pipeline may still be weighing down on the Loonie.

USD/CAD was up by 5 pips (+0.03%) to 1.3191, AUD/CAD was up by 5 pips (+0.05%) to 0.9554, NZD/CAD was up by 10 pips (+0.12%) to 0.8901

Watch Out For:

  • 1:30 pm GMT: Headline (0.2% expected, same as previous) and core (0.2% expected, same as previous) readings for U.S. PPI
  • 2:05 pm GMT: U.S. Fed Governor Randal Quarles will speak