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The Aussie and the Kiwi got another pounding during the morning London session, very likely because of the risk-off vibes.

The pound, meanwhile, was the top-performing currency of the session, likely because of easing concerns with regard to a potential leadership challenge against Theresa May.

Other than those three, the euro is also noteworthy since it tried to follow the pound higher, but began to take hits when ECB Overlord Draghi spoke, and was forced to limp to the finish line in third-to-last place.

  • German WPI m/m: 0.3% vs. 0.2% expected, 0.4% previous
  • Euro Zone final HICP y/y: 2.2% as expected vs. 2.1% originally
  • Euro Zone final core HICP y/y: unchanged at 1.1% as expected
  • Italy’s trade balance: €1.27B vs. €2.87B expected, €2.49B previous

Major Events/Reports:

Draghi speaks

ECB Overlord Draghi gave a speech near the start of the morning London session.

Nothing seemed out of the ordinary at first. Draghi, for instance, gave the usual positive assessment of the Euro Zone economy, while trying to explain away the recent slowdown in economic growth on “one-off factors” and external factors, namely weaker global trade.

However, Draghi’s tone became a tad more cautious about halfway through his speech.

You see, Draghi had this to say about wage growth and inflation:

“[T]he next leg of the inflation process – the pass-through of wage growth to prices – remains relatively muted. Measures of underlying inflation, such as core inflation, continue to hover around 1% and have yet to show a convincing upward trend.”

And because of the above, Draghi then heavily implied that the ECB’s monetary policy will remain loose for an extended period:

“But in the light of the lags between wages and prices after a period of low inflation, patience and persistence in our monetary policy is still needed.”

Draghi did reaffirm that its QE program will end on December, though. Even so, Draghi still pointed out that:

“[T]he Governing Council also noted that uncertainties surrounding the medium-term outlook have increased.”

Draghi then very heavily implied that the ECB is not only ready to keep rates steady for a long time, but is also ready to cut rates if needed (emphasis mine):

“We have conveyed that we expect interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure that inflation continues to move towards our aim in a sustained manner.”

“The nature of this forward guidance is contingent on economic developments and therefore acts as an automatic stabiliser. If financial or liquidity conditions should tighten unduly or if the inflation outlook should deteriorate, our reaction function is well defined. This should in turn be reflected in an adjustment in the expected path of future interest rates.”

Brexit-related updates

Another day, another batch of Brexit-related updates.

First up is British PM Theresa May’s interview with LBC radio, which was an (apparently successful) attempt to calm markets since Theresa May defended her deal while also reassuring listeners that the DUP, the Conservative Party’s ally, will support her deal.

There were then rumors that a letter of no confidence vote was being prepared…

However, that was apparently overshadowed by rumors that Michael Gove will stay on as Secretary of State for Environment, Food and Rural Affairs.

And those rumors were apparently the real deal since Gove later announced that he was indeed staying on. However, he also said that he won’t take on the job as the next Brexit Secretary.

Even so, Gove still gave his support for Theresa May, saying that:

““I absolutely do [support the PM]. I’ve had a very good morning with a series of meetings with my colleagues here in Defra, just making sure that we have the right policies on the environment, on farming, and on fisheries for the future.

“And I’m also looking forward to continuing to work with all colleagues in government and in parliament to get the best future for Britain.”

As to who the next Brexit Secretary will be, there’s still no progress on that.

Going back to the no confidence vote, there are only 21 (of the 48 needed) letters so far, which is goods news for Theresa May (and the pound).

Risk-off ending in Europe

Europe is ending the trading week where it began – with a bout of risk aversion.

The major European equity indices actually had a strong start and even added to gains. However, bears later came out of the woods and roasted the bulls, forcing most of the major European equity indices to erase their gains and enter negative territory.

And according to market analysts, the earlier risk-on vibes were due to positive earnings results and probably relief buying after yesterday’s Brexit-induced sell-off.

As for the later signs of risk aversion, it’s not yet very clear what brought hat about. However, the tech sector clearly underpormed, so it’s possible that disappointing news about Nvidia continue to plague the tech sector.

It’s also possible that Brexit-related jitters are still poisoning overall sentiment. After all, there were reports about a leadership challenge against Theresa May during the session.

  • The pan-European FTSEurofirst 300 was down by 0.07% to 1,410.94
  • Germany’s DAX was down by 0.11% to 11,340.99
  • The blue-chip Euro Stoxx 50 was down by 0.13% to 3,186.05

Major Market Mover(s):


The Aussie and the Kiwi got another pounding during the morning London session, very likely because of the risk-off vibes.

However, it’s also possible that we’re just seeing some profit-taking. After all, the Kiwi and the Aussie are the two biggest winners of the week.

NZD/USD was down by 8 pips (-0.12%) to 0.6811, NZD/CHF was down by 5 pips (-0.07%) to 0.6864, NZD/JPY was down by 15 pips (-0.21%) to 77.10

AUD/USD was down by 10 pips (-0.14%) to 0.7260, AUD/CHF was down by 4 pips (-0.06) to 0.7314, AUD/JPY was down by 19 pips (-0.23%) to 82.18


The pound was the top-performing currency of the session, likely because of easing concerns with regard to a potential leadership challenge against Theresa May, with Michael Gove’s decision to continue working for and with Theresa May being the most notable catalyst.

GBP/USD was up by 49 pips (+0.38%) to 1.2842, GBP/NZD was up by 94 pips (+0.50%) to 1.8850, GBP/AUD was up by 92 pips (+0.53%) to 1.7687

Watch Out For:

  • 1:30 pm GMT: Canadian manufacturing sales (0.1% expected vs. -0.4% previous)
  • 1:30 pm GMT: Canada’s foreign security purchases ($0.30B expected vs. $2.82B previous)
  • 2:15 pm GMT: U.S. industrial production (0.2% expected vs. 0.3% previous)
  • 2:15 pm GMT: U.S. capacity utilization (78.3% expected vs. 78.1% previous)
  • 2:30 pm GMT: CB’s U.K. leading index (-0.2% previous)
  • 3:30 pm GMT: CB’s Australian leading index (0.2% previous)