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Despite the risk-off vibes in Europe, the Aussie and Kiwi both staged a broad-based recovery as the Greenback slumped across the board.

The euro was also a beneficiary of the Greenback’s overall weakness since the euro began finding buyers on most pairs when the Greenback began to tank. The euro even closed out the session in third place, losing out only to the Aussie and Kiwi.

The pound, meanwhile, was mixed during the session since the BOE’s decision to maintain its monetary policy while maintaining a wait-and-see stance because of Brexit was an expected move.

  • Swiss trade balance: CHF 4.74B vs. CHF 3.20B expected, CHF 3.52B previous
  • Euro Zone current account: €23.0B vs. €18.4B expected, €17.6B previous
  • U.K. retail sales m/m: 1.4% vs. 0.3% expected, -0.4% previous
  • As expected, 9-0 vote to maintain the BOE’s Bank Rate at 0.75%
  • 9-0 vote to maintain stock of government bonds purchased at £435B
  • 9-0 vote to maintain stock of corporate bonds purchased at £10B

Major Events/Reports:

BOJ Shogun Kuroda’s presser

BOJ Shogun Haruhiko Kuroda gave a presser just before the morning London session rolled around and a few hours after the BOJ delivered its latest monetary policy decision.

Kuroda was asked to elaborate on the perceived risks for Japan’s economy, and he had this to say:

“There are more downside risks to Japan’s economy, particularly via overseas economic developments… If trade frictions persist, that could have a broad impact on Japanese and overseas economies.”

However, Kuroda also tried to sound optimistic when he quickly added that:

“[T]he BOJ’s tankan survey and our internal hearings show the impact of trade frictions on Japan’s economy is limited for now. We need to be vigilant to various risks. But at present, there’s no change to our view Japan’s economy is expanding moderately.”

Kuroda was also asked about the BOJ’s monetary policy stance, and Kuroda maintained that the BOJ still has a neutral stance and that:

“There is no need to exit easy policy and it’s too early to debate a strategy now.”

However, Kuroda also said that:

“If we think doing so would be necessary to sustain the momentum for achieving our price target, we will ease monetary policy further as appropriate.”

“Options include cutting the short-term interest rate target, lowering the long-term yield target, ramping up asset buying and accelerating the pace of increase in base money. Should the need arise, we will take steps as appropriate.”

U.K. retail sales report

The U.K.’s November retail sales report was released earlier during the session, revealing that retail sales volume in the U.K. surged by 1.4% month-on-month, significantly more than the consensus for a 0.3% increase and putting an end to two consecutive months of negative readings.

And as a bonus, the previous reading was also revised to show a slightly weaker 0.4% contraction (-0.5% previous).

Also, the strong retail sales reading in November mean that consumer spending will likely have a positive contribution to Q4 GDP growth.

A closer look at the details show that household goods stores recovered significantly and accounted for a large chunk of the increase in retail sales volume after faring very poorly in October.

However, the Office for National Statistics (ONS) implied that, despite seasonal adjustments, the surge in retail sales likely won’t be sustainable since it noted that:

“Retailers reported strong growth on the month due to Black Friday promotions in November, which continues the shifting pattern in consumer spending to sales occurring earlier in the year.”

Moving on, the year-on-year reading was also impressive since it came in at 3.6%, soundly beating expectations for a 1.9% increase, as well as the 2.8% annual increase recorded in October. The 3.6% increase is also the strongest reading in five months.

MPC decision and meeting minutes

The BOE’s MPC announced their latest monetary policy decision and released the minutes for their latest monetary policy huddle late into the session.

And the main takeaways are:

  • The BOE maintained its current monetary policy
  • The British economy is not evolving as expected since the economy’s rate of expansion is slower than expected and falling oil prices are expected to weigh on inflation
  • The BOE’s base case scenario for Brexit is that a no deal, no transition period will be avoided
  • However, “Brexit uncertainties have intensified considerably
  • The BOE is therefore in wait-and-see mode and the BOE’s response to Brexit “will not be automatic and could be in either direction

And if you want more deets, then below are some of the more important and/or interesting points in, well, bullet points for easier reading (emphasis mine):

  • 9-0 vote to maintain the Bank Rate at 0.75%
  • 9-0 vote was expected
  • 9-0 vote to maintain stock of government bonds purchased at £435B
  • 9-0 vote to maintain stock of corporate bonds purchased at £10B
  • The BOE apparently has a downbeat outlook for inflation since “The decline in oil prices also means that UK CPI inflation is likely to fall below 2% in coming months.”
  • The BOE’s outlook for economic growth also deteriorated since “GDP growth was nevertheless now expected to be 0.2% in 2018 Q4, 0.1 percentage points weaker than in the November Inflation Report.”
  • The BOE 2019 GDP forecast also apparently took  a hit since “Based on the limited information available at this stage, the Committee judged that growth was likely to remain around that level [0.1%] in the first quarter of 2019.”
  • And since the British economy is no longer evolving within the BOE’s expectations, “The Committee would undertake a full re-assessment of its projections ahead of the February Inflation Report.”
  • With regard to Brexit, the BOE noted that “Brexit uncertainties have intensified considerably since the Committee’s last meeting.”
  • The further intensification of Brexit uncertainties, coupled with the slowing global economy, has also weighed on the near-term outlook for UK growth.”
  • The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.”
  • The appropriate path of monetary policy will depend on the balance of the effects on demand, supply and the exchange rate.”

Progress in trade talks between U.S. and China

Chinese Commerce Ministry spokesman Gao Feng gave a presser at the start of the session.

And he said that he’s confident that there will be a “successful implementation” of the agreement to continue deescalating trade tensions between the two countries.

Gao Feng also said that future trade talks are scheduled:

“The two sides will arrange consultations including meetings and calls at any time as needed to promote the implementation of the consensus of the heads of state.”

Risk aversion returns to torment Europe

Yesterday’s bout of risk-taking was apparently short-lived since risk aversion was the dominant sentiment in Europe again, sending the major European equity indices broadly lower.

And market analysts were blaming the risk-off vibes on tighter credit conditions because of the Fed’s rate hike, as well as growing concerns that the Fed is planning to continue hiking next year despite fears of a possible U.S. recession.

  • The pan-European FTSEurofirst 300 was down by  1.06% to 1,334.18
  • Germany’s DAX was down by 0.98% to 10,660.62
  • The blue-chip Euro Stoxx 50 was down by 1.16% to 3,015.95

Major Market Mover(s):


The Greenback started to encounter sellers a few hours before the morning London session even rolled around.

And during the session itself, the Greenback got a severe beating and limped to the finish line in last place. And thanks to the Greenback’s poor performance during the session, the Greenback now also happens to be the worst-performing currency of the day (so far).

As to why the Greenback weakened, there was no apparent, direct catalyst, but market analysts were pointing to growing concerns that the Fed plans to keep on hiking even as fears that the U.S. economy may enter a recession grow.

USD/JPY was down by 15 pips (-0.13%) to 111.71, USD/CAD was down by 22 pips (-0.17%) to 1.3458, USD/CHF was down by 29 pips (-0.30%) to 0.9889


The Aussie and the Kiwi were apparently the main beneficiaries of the Greenback’s weakness during the session since the two risk-sensitive currencies just shrugged off the risk-off vibes in Europe.

However, it’s also likely that the Aussie and Kiwi were boosted by signs of progress in trade talks between the U.S. and China since the two comdolls were initially losing out to the euro until Gao Feng spoke.

And between the two, it was the Kiwi that reigned supreme since AUD/NZD was down by 28 pips (-0.26%) to 1.0520.

AUD/USD was up by 23 pips (+0.33%) to 0.7133, AUD/CAD was up by 18 pips (+0.19%) to 0.9601, AUD/JPY was up by 22 pips (+0.28%) to 79.75

NZD/USD was up by 40 pips (+0.60%) to 0.6780, NZD/CAD was up by 40 pips (+0.44%) to 0.9125, NZD/JPY was up by 42 pips (+0.55%) to 75.80

Watch Out For:

  • 1:30 pm GMT: ADP’s Canadian non-farm employment change (-23.0K previous)
  • 1:30 pm GMT: Canada’s wholesale sales (0.4% expected vs. -0.5% previous)
  • 1:30 pm GMT: U.S. initial jobless claims (215K expected vs. 206K previous)
  • 1:30 pm GMT: Philadelphia Fed’s manufacturing index (15.0 expected vs. 12.9 previous)
  • 3:00 pm GMT: CB’s leading U.S. index (0.1% expected, same as previous)