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The pound and the euro were the top-performing currencies of the morning London session, very likely because of growing hopes for a Brexit deal.

The Aussie and the Kiwi, meanwhile, were hit by selling pressure at the start of the session and were the worst-performing currencies despite the persistent risk-on vibes during the session.

The comdolls were likely weakened by profit-taking since sellers kicked the two comdolls lower after China confirmed a trade-related rumor from earlier. Basically, a “buy the rumor, sell the news” scenario played out.

  • German final HICP (m/m): unchanged at 0.1% as expected
  • German final HICP (y/y): unchanged at 2.4% as expected
  • French non-farm payrolls (q/q): 0.2% vs. 0.3% expected, 0.0% previous
  • Swiss PPI (m/m): 0.2% vs. 0.1% expected, -0.2% previous
  • Chinese new yuan loans: 687B vs. 915B expected, 1,380B previous
  • U.K. jobless rate: 4.1% vs. steady at 4.0% expected
  • U.K. average earning (3m y/y): 3.0% as expected vs. 2.8% previous
  • Claimant count change in the U.K.: 20.2K vs. 4.3K expected, 18.5K previous
  • German ZEW economic sentiment: -24.1 vs. -24.2 expected, -24.7 previous
  • Euro Zone ZEW economic sentiment: -22.0 vs. -17.3 expected, -19.4 previous
  • NFIB U.S. small business index: 107.4 vs. 108.0 expected, 107.9 previous

Major Events/Reports:

U.K. jobs report

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

And it revealed that the jobless rate in the three months to September ticked higher from 4.0% to 4.1%, which is a bit disappointing since the consensus was that it would hold steady at 4.0%.

Meanwhile, the number of people who claimed unemployment benefits rose by 20.2K in October, which is also a disappointment since the market was only expecting a 4.3K increase.

As for wage growth, average weekly earnings only grew by 2.8% year-on-year in September (+3.1% previous), which marks the second month of weaker readings.

However, the three-month average still comes in at 3.0%, which is within expectations. Also, the weaker reading was due partly to the 7.4% slump in bonuses pair (+0.2% previous)

But again, wage growth continued to slow. Also, even if bonuses are stripped, regular earnings only increased by 3.2% in September (+3.3% previous).

But on a more upbeat note, real wage growth (inflation is taken into account) increased by 0.7% year-on-year in September, matching the previous month’s rate of increase.

Even better, if we remove bonuses, then earnings grew by 1.0%, which is the best reading since November 2016.

China confirms trade-related rumor

There was a rumor during the earlier Asian session that the U.S. and China will resume trade talks.

Well, Foreign Ministry Spokesperson Hua Chunying held a presser at the start of the European session and she was naturally asked about the rumor.

And she basically confirmed the rumor by saying that:

“What I can confirm for you is that not long ago, President Xi Jinping and President Trump had a telephone conversation, during which the two leaders agreed that the economic teams from the two countries should increase engagement and conduct consultations on issues of mutual concern so as to seek a solution that can be accepted by both sides on China-US trade issues.”

Italy-related update

Today is D-day for Italy to resubmit a modified budget to the E.U. and, well, the Italian government appears to be playing hard ball.

However, there were reports that Italy will fight to keep its deficit target for 2019, but agree to lower its growth forecasts to be more in-line with the E.U.’s forecasts and try to be more conciliatory with the E.U.

Economy Minister Giovanni Tria would shoot down those reports in a speech, however, saying that:

“I deny rumors and leaks in the newspapers, according to which, Italy’s growth rate was, or is, the subject of political debate.”

“The growth forecasts are the result of an exclusively technical evaluation.”

Brexit-related updates

As usual, there were plenty of Brexit-headlines during the session. And this time, the gist of it is that there seems to have been some progress.

Anyhow, let’s focus only on the most interesting and/or market-moving Brexit news (as usual).

And first and foremost is British Cabinet Office Minister David Lidington’s comment during a BBC interview since that caused the pound to spurt higher at the start of the session.

You see, Lidington was asked if it’s possible to hammer out a Brexit deal within 24-48 hours and Lindington responded as follows:

“Still possible but not at all definite, I think pretty much sums it up. Cautiously optimistic.”

Lindington also warned a deal is “not quite there yet,” but he also raised hopes for a deal when he added that:

“We are almost within touching distance now.”

Speaking of an imminent Brexit deal, there were also these tweets from ITV News anchor Tom Bradby and Tom Newton Dunn, Political Editor of The Sun newspaper.

Risk appetite revived in Europe

After getting a beating yesterday, the major European equity indices staged a broad-based recovery today.

And according to market analysts, the risk-friendly vibes from the earlier Asian session spilled over into the European session since growing hopes that China and the U.S. can sit down and reason together are still being cited as the reason for the risk-friendly environment.

  • The pan-European FTSEurofirst 300 was up by 0.56% to 1,432.55
  • Germany’s DAX was up by 0.98% to 11,436.11
  • The blue-chip Euro Stoxx 50 was up by 0.74% to 3,216.75

Major Market Mover(s):

GBP & EUR

The pound and the euro easily dominated their peers during the morning London session. And between the two, it was the pound that came out on top. In fact, the pound is now the top-performing currency of the day (so far).

And demand for the euro and the pound appear to have been due to growing hopes for a Brexit deal and British Cabinet Office Minister’s optimistic comment appears to have been the spark that triggered demand for the euro and the pound since the two European currencies jumped higher when Lidington spoke.

As to why the euro lagged behind the pound, that’s probably because Italy-related concerns are still weighing down on the euro. After all, today is D-day for Italy to resubmit an amended budget.

However, it’s also possible that the pound may have been pushed higher because of follow-through buying since some details of the U.K.’s jobs reports (namely with regard to wage growth) were positive.

GBP/USD was up by 62 pips (+0.48%) to 1.2949, GBP/AUD was up by 102 pips (+0.57%) to 1.7972, GBP/NZD was up by 96 pips (+0.51%) to 1.9181

EUR/USD was up by 22 pips (+0.20%) to 1.1259, EUR/AUD was up by 43 pips (+0.28%) to 1.5626, EUR/NZD was up by 35 pips (+0.21%) to 1.6678

AUD & NZD

The Aussie and the Kiwi are still net winners for the day (so far), but they were the main losers of morning London session, thanks to the strong selling pressure at the start of the session.

And the apparent trigger for the sell-off was Hua Chunying’s presser confirming an earlier trade-related rumor, so the Aussie and the Kiwi were likely weakened because of profit-taking.

AUD/USD was down by 6 pips (-0.08%) to 0.7205, AUD/JPY was down by 14 pips (-0.18%) to 82.10, AUD/CHF was down by 17 pips (-0.23%) to 0.7272

NZD/USD was down by 3 pips (-0.04%) to 0.6750, NZD/JPY was down by 8 pips (-0.11%) to 76.92, NZD/CHF was down by 11 pips (-0.16%) to 0.6814

Watch Out For:

  • 3:00 pm GMT: U.S. Fed Governor Lael Brainard will deliver a speech
  • 3:00 pm GMT: Minneapolis Fed President Neel Kashkari will speak
  • 7:00 pm GMT: U.S. Federal budget balance (-$116.6B expected vs. $119.1B previous)