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Price action was rather choppy for the most part and many currency pairs were essentially range-bound during the morning London session.

However, GBP pairs were clearly on the move since they caught a bid and trended higher across the board when British Chancellor of the Exchequer Philip Hammond defended Theresa May’s Brexit deal.

As for other currencies of note, the Kiwi is worth highlighting since it was nudged broadly lower and was the worst-performing currency despite the cautious risk-taking in Europe.

  • German GFK consumer climate: 10.4 vs. 10.5 expected, 10.6 previous
  • Credit Suisse economic expectations: -42.3 vs. -39.1 previous
  • Euro Zone private loans y/y: 3.2% as expected, same as previous

Major Events/Reports:

Hammond speaks

British Chancellor of the Exchequer Philip Hammond made the media rounds near the start of the session and he was naturally asked to comment on Theresa May’s Brexit deal.

Hammond conceded that “If you look at this purely from an economic point of view, [then] yes there will be a cost to leaving the European Union because there will be impediments to our trade.”

Hammond also conceded that “looking purely at the economics, remaining in the single market would give us an economic advantage.”

However, Hammond was quick to add that Theresa May’s deal “absolutely minimise those costs” and also have “political benefits“.

He further defended Theresa May’s deal while calling for unity when he said that “All of the other options have disadvantages and we have to look not only at the economy but also the need to heal a fractured nation. We will not be successful if we remain fundamentally divided and fractured on this issue.”

Moreover, Hammond stressed that Theresa May’s deal is “the optimum way of leaving the European Union and delivering on the result of the referendum.”

Hammond also pointed out that the U.K. economy will still continue to grow and that the negative effects of Theresa May’s deal would only be “very small”.

Shortly after delivering those comments, Hammond also announced (via twitter) that he had published an article.

And, well, he basically repeated his defense of Theresa May’s Brexit plan. However, these bits are worth highlighting since he said that “businesses big and small” supposedly support Theresa May’s deal.

“As Chancellor, I spend much of my time speaking to businesses big and small. As in the country, opinion amongst them on leaving the EU was divided. But overwhelmingly now, they tell me that the main thing holding this country back is uncertainty.”

“They see the pragmatic approach the Prime Minister and her negotiators have taken and they want us to get on with things so they can get on with investing in Britain’s future. And that is exactly what we will do.”

“This is the best deal possible – it will deliver Brexit while helping to heal the country, get businesses investing again, and set us on the path to a united, brighter future.”

McDonnell speaks

At around the same time that Hammond was making the media rounds, British Labour MP John McDonnell also got some press time.

And he said that a second Brexit referendum “might be an option we seize upon.”

He also predicted that Theresa May’s deal will lose the vote in Parliament and that any revised deal would also fail. Moreover, “All through that, we [Labour] will be calling for a general election.”

McDonnell also warned that “Whether and when we put a vote of no confidence down will be a tactical decision. We’ll want a maximum effect.”

Cautious Risk-taking in Europe

After getting whupped yesterday, the major European equity indices staged a broad-based recovery during today’s morning London session.

And according to market analysts, risk sentiment improved because of growing hopes that the U.S. and China will call for a truce to the ongoing trade war when Trump and Xi Jinping meet at a G20 meeting.

  • The pan-European FTSEurofirst 300 was up by 0.22% to 1,411.04
  • Germany’s DAX was up by 0.16% to 11,327.29
  • The blue-chip Euro Stoxx 50 was up by 0.43% to 3,180.05

Major Market Mover(s):

GBP

The pound caught a bid when Hammond was making the media rounds, so Hammond’s comments were the apparent catalysts for the pound’s rally during the morning London session.

However, some market analysts were attributing the pound’s rise to McDonnell’s call for a second Brexit referendum, even though McDonnell also threatened to oust Theresa May from power.

GBP/USD was up by 47 pips (+0.37%) to 1.2793, GBP/NZD was up by 72 pips (+0.38%) to 1.8825, GBP/AUD was up by 55 pips (+0.31%) to 1.7677

NZD

Like most other currency pairs, Kiwi pairs had choppy price action during the morning London session.

The Kiwi is worth highlighting, though, since it was nudged broadly lower and was the worst-performing currency of the session, even though there were signs of risk-taking in Europe.

NZD/USD was down by 2 pips (-0.01%) to 0.6794, NZD/CHF was down by 7 pips (-0.10%) to 0.6786, NZD/JPY was down by 3 pips (-0.04%) to 77.34

Watch Out For:

  • 1:30 pm GMT: U.S. preliminary GDP (upgrade from 3.5% to 3.6% expected) and GDP price index (no change from 1.7% expected)
  • 1:30 pm GMT: U.S. goods trade balance (-$77.0B expected vs. -$76.0B previous)
  • 1:30 pm GMT: U.S. wholesale inventories (0.4% expected, same as previous)
  • 3:00 pm GMT: U.S. new home sales (575K expected vs. 553K previous)
  • 3:00 pm GMT: Richmond Fed’s manufacturing index (16 expected vs. 15 previous)
  • 3:30 pm GMT: U.S. crude oil inventories (0.6M expected vs. 4.9M previous)
  • 4:30 pm GMT: The BOE’s bank stress test results and financial stability report will be released
  • 4:45 pm GMT: BOE Guv’nah will hold a presser
  • 5:00 pm GMT: Fed Chair Powell is scheduled to give a speech