The comdolls (AUD, NZD, CAD) were engaged in a battle royal as commodities rallied and risk-taking persisted during today’s morning London session. In the end, there can only be only one, however. And that turned out to be the Aussie.
Meanwhile, the euro got its lights punched out after Reuters released a report related to ECB Overlord Draghi’s expected appearance at next week’s Jackson Hole Symposium.
As for the other currencies, the pound jumped higher, thanks to the better-than-expected U.K. jobs report. However, there was little follow-through buying, probably because the details on wage growth were not as awesome, and so the pound ended the session mixed.
USD, CHF, and JPY, meanwhile, had choppy price action. However, the positive correlation between the Swissy and the euro means that the euro’s weakness also had an effect on the Swissy, and so the Swissy ended the session as the second worst-performing currency.
- Italy’s preliminary GDP q/q: 0.4% as expected, 0.2% previous
- U.K. claimant count change: -4.2K vs. 3.2K expected, 3.5K previous
- U.K. jobless rate: 4.4% vs. steady at 4.5% expected
- U.K. average earnings index: 2.1% vs. 1.8% expected, 1.9% previous
- Euro Zone flash GDP q/q: 0.6% as expected, same as previous
- FOMC meeting minutes will be released later
Mostly upbeat U.K. jobs report
According to the U.K.’s latest jobs report, the jobless rate ticked even lower from 4.5% to 4.4% in the three months to June. This is a new record low since comparable records began in 1975!
This is great because the consensus was for the jobless rate to hold steady at 4.5%. Moreover, the jobless rate improved even as the employment rate jumped 74.9% to 75.1%, which is a new record high since comparable records began in 1971. Not only that, the number of people claiming unemployment benefits in July fell by 4.2K instead of increasing by 3.2K.
As for wage growth, nominal average weekly earnings (bonuses included) surged by 2.8% year-on-year in June, with a three-month average of 2.1%.
The three-month average ends three consecutive months of weaker readings and is better than the consensus that it would deteriorate further to 1.8%.
The only downside is that the surge was due to a massive 17.2% increase in bonuses. If bonuses are stripped, then wage growth actually slowed from 2.3% to 2.1% and is probably the reason why the pound didn’t get any follow-through buying.
Also, real earnings (inflation is taken into account) continue to take hits, with real average weekly earnings (bonuses excluded) falling by another 0.4%.
But on a slightly more upbeat note, if bonuses are included then real earnings print a 0.5% increase after two straight months of declines.
According to a Reuters report that cited two unnamed sources who were “familiar with the situation,” ECB Overlord Draghi will be at the U.S. Fed’s Jackson Hole symposium next week.
However, Draghi supposedly won’t be talking about a widely anticipated shift in the ECB’s monetary policy stance.
This “news” very likely disappointed monetary policy junkies who were expecting Draghi to signal a tightening in the ECB’s monetary policy after a July 13 Wall Street Journal article first broke the news that ECB Overlord Draghi will be participating in the U.S. Fed’s Jackson Hole conference in August.
After all, that Wall Street Journal article said that Draghi will supposedly use the Jackson Hole event to give “a further sign of the ECB’s growing confidence in the eurozone economy and its reduced dependence on monetary stimulus.”
Commodities extend recovery, but…
After retreating for the past few days, commodities were able to turn the tide of battle during the earlier Asian session.
And in today’s morning London session, commodities were able to take back even more ground. However, the recovery wasn’t broad-based since precious metals got struck down and were bleeding out.
Base metals were in very high demand and most of the top-performing commodities were base metals.
- Copper was up by 1.49% to $2.926 per pound
- Nickel was up by 2.26% to $10,607.50 per dry metric ton
Oil benchmarks were also in the green.
- U.S. WTI crude oil was up by 0.40% to $47.74 per barrel
- Brent crude oil was up by 0.49% to $51.05 per barrel
Meanwhile, precious metals couldn’t find any respite, likely because of the persistent risk-on vibes.
- Gold was down by 0.29% to $1,275.95 per troy ounce
- Silver was down by 0.23% to $16.675 per troy ounce
Aside from profit-taking, market analysts couldn’t really pinpoint the reason for the commodities recovery. However, some market analysts attributed the strong performance of base metals on expectations of higher demand from China after the IMF upgraded its growth projections for the top commodities consumer.
As for the rise in oil prices, market analysts attributed that to speculation that the official U.S. oil inventories from the Energy Information Administration would print a big draw later.
Risk appetite persists in Europe
Another day, another bout of risk-taking in Europe, so the major European equity indices were shining gamma green yet again.
Market analysts attributed today’s risk-on vibes to the commodities rally since that apparently boosted mining and energy shares, which then improved overall risk sentiment in Europe.
- The pan-European FTSEurofirst 300 was up by 0.73% to 1,489.71
- Germany’s DAX was up by 0.87% to 12,283.50
- The blue-chip Euro Stoxx 50 was up by 0.89% to 3,493.50
The risk-on vibes in Europe also gave U.S. equity futures some support.
- S&P 500 futures were up by 0.17 to 2,468.00
- Nasdaq futures were up by 0.18% to 5,922.88
Major Market Mover(s):
The comdolls (AUD, NZD, CAD) battled it out during the course of the session as the commodities rally and risk-on sentiment spurred demand for the comdolls. And in the end, it was the Aussie that emerged triumphant.
AUD/USD was up by 19 pips (+0.25%) to 0.7875, AUD/JPY was up by 23 pips (+0.26%) to 87.05, AUD/CHF was up by 28 pips (+0.38%) to 0.7651
NZD/USD was up by 17 pips (+0.23%) to 0.7250, NZD/JPY was up by 19 pips (+0.25%) to 80.33, NZD/CHF was up by 26 pips (+0.37%) to 0.7060
USD/CAD was down by 18 pips (-0.15%) to 1.2735, GBP/CAD was down by 9 pips (-0.06%) to 1.6386, EUR/CAD was down by 46 pips (-0.31%) to 1.4914
The euro had a mixed start before getting swamped by selling pressure when Reuters released its report, very likely because monetary policy junkies were disappointed to learn that ECB Overlord Draghi (supposedly) won’t be hinting at the ECB’s future tightening moves.
EUR/USD was down by 20 pips (-0.17%) to 1.1710, EUR/AUD was down by 63 pips (-0.42%) to 1.4903, EUR/NZD was down by 64 pips (-0.40%) to 1.6152
Watch Out For:
- 12:30 pm GMT: Canada’s foreign security purchases ($23.45B expected, $29.46B previous)
- 12:30 pm GMT: U.S. building permits (1.25M expected, 1.28M previous) and housing starts (1.22M expected, 1.22M previous)
- 2:30 pm GMT: U.S. crude oil inventories (-3.0M expected, -6.5M previous)
- 6:00 pm GMT: FOMC meeting minutes scheduled for release