The Greenback encountered broad-based selling pressure during the entire duration of the morning London session and was naturally the worst-performing currency of the session.
One currency’s pain is another currency’s gain, though. Well, in this case, two currencies were gaining at the Greenback’s expense, namely the euro and the pound, although the pound’s rise was also partially attributed to yesterday’s Brexit-related developments.
- Ifo’s German business climate: 101.0 vs. 101.8 expected, 102.0 previous
- Ifo’s German business expectations: 97.3 vs. 98.3 expected, 98.7 previous
SECO updated quarterly forecasts
Switzerland’s State Secretariat for Economic Affairs (SECO) released its updated quarterly forecasts earlier.
And, well, SECO downgraded its 2018 GDP growth forecast from 2.9% to 2.6%. Likewise, the 2019 GDP growth forecast was revised lower from 2.0% to 1.5%.
SECO blamed the downgrade for 2018’s GDP growth forecast on “the decline in international growth” and the “appreciation of the Swiss franc,” which both contributed weaker Swiss foreign trade.
The 2019 GDP growth forecast, meanwhile, was downgraded because “From 2019, the global economy will continue to normalise after the strongly expansionary phase of 2017 and 2018. The eurozone is expected to slow down slightly faster than assumed for the September forecast. Foreign demand for Swiss products will flatten out and the export economy will lose momentum.”
As for inflation, SECO maintained its forecast that Switzerland’s CPI will increase by 1.0% this year, but downgraded its 2019 forecast from 0.8% to 0.5% due to “the recent drop in oil prices, among other factors.”
Overall, not really that surprising since the SNB also downgraded its growth and inflation forecasts during last week’s SNB statement.
Trump tweets (against the Fed)
The Fed will be announcing its last monetary policy statement of the year tomorrow, and this is what U.S. President Trump had to say about an expected rate hike.
I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!
— Donald J. Trump (@realDonaldTrump) December 18, 2018
Another risk-off day in Europe (but improving)
Risk aversion plagued Europe for yet another day, which sent the major European equity indices reeling in pain.
However, there were signs that appetite for risk may finally be returning since the major European equity indices eventually found support and began clawing their way back up.
Heck, some of them were even already in positive territory by the end of the session.
Anyhow, market analysts blamed the risk-off vibes on risk sentiment spillover from the earlier session, as well as the plunge on oil prices.
As for the later signs that risk aversion may be fading, it’s not yet clear what brought that about, but oil benchmarks were able to lick their wounds during the session and the major European equity indices began to recover at around the same time that oil benchmarks recovered, so it’s highly probable that the recovery in oil prices may be the reason for the improving risk sentiment.
- The pan-European FTSEurofirst 300 was down by 0.13% to 1,353.93 but off the day’s low at 1,344.76
- Germany’s DAX was already up by 0.35% to 10,810.44 after hitting an intraday low of 10,713.28
- The blue-chip Euro Stoxx 50 was down by 0.08% to 3,061.15 but off the day’s low at 3,042.55
Major Market Mover(s):
EUR & GBP
The euro and the pound were the top-performing currency of the morning London session.
And between the two, it was the pound that came out on top and also happens to be the top-performing currency of the day (so far).
There weren’t any apparent catalysts, but market analysts were suggesting that the euro was likely feeding off the Greenback’s weakness.
The pound’s rise, meanwhile, was attributed by market analysts to Greenback weakness and cautious Brexit-related optimism after Theresa May confirmed that Parliament will vote on her Brexit deal by mid-January and after she secures assurances from the E.U. that the backstop solution won’t trap the U.K.
GBP/USD was up by 42 pips (+0.33%) to 1.2687, GBP/CHF was up by 31 pips (+0.25%) to 1.2580, GBP/CAD was up by 54 pips (+0.32%) to 1.7000
EUR/USD was up by 23 pips (+0.21%) to 1.1380, EUR/CHF was up by 15 pips (+0.13%) to 1.1285, EUR/CAD was up by 29 pips (+0.19%) to 1.5248
The embattled Greenback had another rough day today. And like yesterday, market analysts were blaming the Greenback’s weakness on skittishness ahead of tomorrow’s FOMC statement amid expectations that the Fed may deliver a dovish hike.
USD/JPY was down by 12 pips (-0.11%) to 112.39, USD/CHF was down by 8 pips (-0.08%) to 0.9915, USD/CAD was down by 3 pips (-0.02%) to 1.3399
Watch Out For:
- 1:30 pm GMT: U.S. building permits (1,260K expected vs. 1,263K previous) and housing starts (1,228K expected, same as previous)
- 1:30 pm GMT: Canadian manufacturing sales (0.5% expected vs. 0.2% previous)
- 8:00 pm GMT: Westpac’s New Zealand consumer sentiment index (103.5 previous)
- 9:45 pm GMT: New Zealand’s current account (-$5.94B expected vs. -$1.62B previous)
- Dairy auction currently underway (2.2% previous); auction usually ends at around 2:00 pm GMT