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After a rather volatile Asian session, things calmed down a bit during the morning London session  Risk aversion persisted, though, so the safe-haven Swissy and yen were able to extend their gains.

  • French BOF business sentiment: 105.0 vs. steady at 103.0 expected
  • Italian industrial production m/m: 1.1% vs. 0.2% expected, 0.7% previous
  • RBNZ statement and presser later

Major Events/Reports

Commodities rally

After getting a beat-down for a few days, commodities switched into rally mode during today’s morning London session, with precious metals leading the way.

Precious metals clearly outperformed, very likely because of the risk-off vibes.

  • Gold was up by 1.07% to $1,276.06 per troy ounce
  • Silver was up by 1.81% to $16.685 per troy ounce

Base metals were broadly in the green.

  • Copper was up by 0.05% to $2.944 per pound
  • Nickel was up by 0.23% to $10,767.50 per dry metric ton

Oil benchmarks also did well.

  • U.S. WTI crude oil was up by 0.57% to $49.45 per barrel
  • Brent crude oil was up by 0.63% to $52.47 per barrel

Aside from profit-taking by shorts, there was no one unifying reason for the broad-based commodities rally.

However, market analysts were quick to say that base metals were broadly supported because of expected production cuts in China, which would weaken supply.

Oil benchmarks, meanwhile, were up because of expectations that official U.S. oil inventory data from the EIA would print a draw later, market analysts say.

As for the strong performance of precious metals, that can easily be attributed to safe-haven demand because of the intense risk-off vibes. After all, precious metals are considered as traditional safe-havens.

Risk aversion domination

The major European equity indices opened in the red and then proceeded to bleed out during the course of the morning London session. As such, risk aversion was still the name of the game in Europe.

And quite naturally, market analysts were still blaming the feelings of doom and gloom on the saber rattling (but with nukes) between the U.S. and North Korea.

Other than that the incident in Paris, wherein six French soldiers were (allegedly) intentionally mowed down by a car, was also being cited as a reason for the risk-off vibes.

  • The pan-European FTSEurofirst 300 was down by 0.94% to 1,491.01
  • Germany’s DAX was down by 1.43% to 12,116.50
  • The blue-chip Euro Stoxx 50 was down by 1.63% to 3,457.50

U.S. equity futures were also in the red, so the risk-off vibes may carry over into the U.S. session.

  • S&P 500 futures were down by 0.50% to 2,460.50
  • Nasdaq futures were down by 0.77% to 5,872.50

BOE’s business conditions survey

The BOE released it’s latest Agents’ summary of business conditions earlier today. And, well, it noted that construction output growth “remained modest.” Investment intentions, meanwhile, “remained modestly positive overall.” However, “Uncertainty … continued to weigh on some firms’ longer-term spending plans.”

With regard to consumer spending, the report noted that “growth had slowed slightly further.” This was attributed to “increased caution among consumers, and to consumers trading down to cheaper products or brands.”

As for the labor market, the report had this to say (emphasis mine):

“Recruitment difficulties had edged higher, and were gradually broadening across sectors and skill areas. Despite this, labour cost growth had been modest, with pay awards clustered around 2%–3%.

Overall, a bit dovish on growth with warning signs for wage growth. Not surprising, though, since the BOE did downgrade its growth and wage growth projections in the latest BOE statement.

Major Market Mover(s):

CHF & JPY

The safe-haven Swissy and yen were able to extend their gains during the morning London session, thanks to the persistent risk-off vibes.

And between the two of them, the Swissy had the upper hand, emerging as the one currency to rule them all during the session, with CHF/JPY up by 46 pips (+0.41%) to 113.99.

In fact, the Swissy is currently on course to finish as the top-performing currency of the day.

USD/JPY was down by 31 pips (-0.28%) to 109.72, EUR/JPY was down by 42 pips (-0.33%) to 128.82, CAD/JPY was down by 22 pips (-0.25%) to 86.52

USD/CHF was down by 64 pips (-0.66%) to 0.9627, EUR/CHF was down by 83 pips (-0.73%) to 1.1300, CAD/CHF was down by 49 pips (-0.65%) to 0.7590

GBP

You know that the Swissy and the yen were the best-performing currencies of the session. But which one was at the bottom of the heap? Well, that happens to be the pound, even though there were no apparent catalysts.

The pound’s weakness may just be a continuation of its slide since the BOE statement. Although it’s possible that the results of BOE’s business conditions survey helped to kick the pound lower, even though it basically reiterated what we already know from the BOE statement.

GBP/USD was down by 16 pips (-0.12%) to 1.2993, GBP/JPY was down by 55 pips (-0.39%) to 142.57, GBP/CHF was down by 97 pips (-0.77%) to 1.2508

Watch Out For:

  • 12:15 pm GMT: Canadian housing starts (204K expected, 213K previous)
  • 12:30 pm GMT: Canadian building permits (-1.8% expected, 8.9% previous)
  • 12:30 pm GMT: U.S. preliminary non-farm productivity (0.7% expected, 0.0% previous) and unit labor costs (1.1% expected, 2.2% previous)
  • 2:00 pm GMT: U.S. final whole inventories (no change from 0.6% expected)
  • 2:30 pm GMT: U.S. crude oil inventories (-2.6M expected, -1.5M previous)
  • 9:00 pm GMT: RBNZ statement (OCR steady at 1.75% expected); read Forex Gump’s preview here
  • 10:00 pm GMT: RBNZ presser