The Aussie was the one currency to rule them all during the session, likely because of the risk-friendly vibes in Europe.
The pound, meanwhile, got a severe beating across the board, thanks to the growing possibility of a “no deal” Brexit, coupled with Carney’s warnings from yesterday and earlier today.
Aside from those two, the euro is also worth highlighting since it caught a bid after the ECB’s financial stability report was released.
- Swiss GDP q/q: -0.2% vs. 0.4% expected, 0.7% previous
- French consumer spending m/m: 0.8% vs. 0.5% expected, -2.0% previous
- French preliminary GDP q/q: 0.4% as expected, same as previous
- Spanish HICP y/y: 1.7% vs. 2.0% expected, 2.3% previous
- German unemployment change: -16K vs. -10K expected, -11K previous
- U.K. net lending individuals: £5.0B vs. £4.5B expected, £4.9B previous
- U.K. mortgage approvals: 67K vs. 65K expected, 66K previous
- Euro Zone consumer confidence: steady at -3.9 as expected
- Euro Zone industrial sentiment: 3.4 vs. 2.5 expected, 3.0 previous
- German HICP y/y: 2.2% vs. 2.3% expected, 2.4% previous
BOE Guv’nah Carney was interviewed by the BBC at the start of the session, and Carney took the opportunity to try and defend himself from accusation that he was trying to scare the market.
However, Carney likely only added to Brexit-related concerns since he warned that British business were not ready for a “no deal” Brexit.
Here’s what he specifically had to say:
“[W]e know from our contacts with business, others know from their contacts, that less than half the businesses in the country have initiated their contingency plans for a no-deal Brexit”.
“All the industries, all the infrastructure of the country, are they all ready at this point in time? And, as best as we can tell, the answer is no.”
Arlene Foster speaks
The Democratic Unionist Party of Northern Ireland (DUP) currently props the Conservative Party’s minority government.
And earlier today, DUP leader Arlene Foster essentially said that the DUP does not support Theresa May’s Brexit deal when Foster said that (emphasis mine):
“We have always been very clear with the government that our one red line was that we shouldn’t be differentiated from the rest of the United Kingdom in terms of customs and in terms of regulatory alignment.
“We are very open to allow the government to work away at other solutions in terms of what is the best way to leave the European Union.”
“Let us look for a better deal. A deal that is good not just for Great Britain, but is good for Northern Ireland as well. What we want to see is taking back control of our money, and our borders and our laws. And unfortunately Theresa May’s deal doesn’t do any of that.”
ECB’s financial stability report
The ECB released its latest financial stability report late into the session. And according to the ECB, the “financial stability environment has become more challenging.”
The ECB then pointed out that “downside risks to the global growth outlook have become more pronounced since May relating to a resurgence in protectionism and stress in emerging markets.”
The ECB also noted that “the possibility of a cliff-edge Brexit could pose a risk to financial stability.”
And with regard to the Euro Zone itself, the ECB noted that “political and policy uncertainty, related to market concerns about public spending plans have increased over the review period.”
However, the ECB also tried to sound optimistic when it highlighted that “a growing economy and improved banking sector resilience have continued to support the financial stability environment in the euro area.”
Moreover, “a series of volatility events have not spread to the broader global financial system.” And concerns surrounding Italy, in particular, haven’t “meaningfully spilled over to other euro area countries.”
British media blitz on Brexit
The British media machine unleashed a media blitz that …. highlighted BOE Guv’nah Carney’s economic warnings from yesterday.
And here is a small sample of the headlines to give y’all an idea of the overall tone of those reports.
— Allie Hodgkins-Brown (@AllieHBNews) November 28, 2018
Guardian front page, Thursday 29 November 2018: Warnings over economy deal blow to May's Brexit strategy pic.twitter.com/EDqFU5jzFc
— The Guardian (@guardian) November 28, 2018
— The Sun (@TheSun) November 28, 2018
Risk-friendly day in Europe
Despite Brexit-related fears, risk-taking apparently prevailed in Europe since most of the major European equity indices were broadly higher during the session, although they did encounter some selling pressure near the end.
And market analysts say that today’s bout of risk-taking was due to Fed Chair Powell’s comment from yesterday, which lowered rate hike expectations and sustained the idea that credit conditions will remain easy for a little while longer.
- The pan-European FTSEurofirst 300 was up by 0.30% to 1,412.24
- Germany’s DAX was up by 0.25% to 11,326.84
- The blue-chip Euro Stoxx 50 was up by 0.31% to 3,180.45
Global bond yields slide
Despite signs of risk-taking in the European equities market, global bond yields were broadly in retreat during the session.
And market analysts were blaming the slide in bond yields on Fed Chair Powell’s dovish comments from yesterday.
However, it’s also possible that growing Brexit-related concerns may have fueled safe-haven demand for bonds.
- German 10-year bond yield down by 6.31% to 0.327%
- French 10-year bond yield down by 3.11% to 0.710%
- U.K. 10-year bond yield down by 2.98% to 1.337%
- U.S. 10-year bond yield down by 1.12% to 3.010%
- Canadian 10-year bond yield down by 1.42% to 2.295%
Major Market Mover(s):
The pound got rushed by sellers at the start of the session and then continued to get a a beating on most pairs as the session progressed.
The pound suffered the bulk of its losses when Carney was speaking, so Carney’s warnings appear to have been the direct catalysts.
However, some market analysts also pointed to growing concerns that Theresa May’s deal may not find enough support in Parliament, which could lead to a “no deal” Brexit.
GBP/USD was down by 60 pips (-0.47%) to 1.2774, GBP/JPY was down by 63 pips (-0.44%) to 144.69, GBP/AUD was down by 107 pips (-0.61%) to 1.7410
The Aussie was able to add to its gains and was the top-performing currency of the session and also happens to the top-ranking currency of the day (so far). And we can probably thank another round of risk-taking for the Aussie’s strength.
AUD/USD was up by 11 pips (+0.15) to% 0.7337, AUD/CHF was up by 25 pips (+0.34%) to 0.7296, AUD/CAD was up by 30 pips (+0.31%) to 0.9742
Watch Out For:
- 1:30 pm GMT: Canada’s current account (-$11.75B expected vs. -$15.88B previous)
- 1:30 pm GMT: U.S. initial jobless claims (221K expected vs. 224K previous)
- 1:30 pm GMT: U.S. personal income (0.4% expected vs. 0.2% previous) and personal spending (0.4% expected, same as previous)
- 1:30 pm GMT: U.S. core PCE price index (0.2% expected, same as previous)
- 3:00 pm GMT: U.S. pending home sales (0.5% expected, same as previous)
- 7:00 pm GMT: The minutes of the latest FOMC meeting will be released; read Forex Gump’s write-up
- 9:45 pm GMT: Building consents in New Zealand (-1.5% previous)