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Not much on the docket today. Even so, there was decent enough (but wonky) price action since the euro was in recovery mode while the pound jumped higher before meeting sellers near the end.

The Swissy, meanwhile, fared rather poorly during the session, likely because there were signs of returning appetite for risk.

As for the other currencies, the Greenback was mixed but selling pressure seems to be building up, the Loonie was also mixed, the yen gave back some of its gains from the earlier session, and the higher-yielding Aussie and Kiwi were net winners, likely because of the commodities rally and returning risk-on vibes.

  • No major economic reports were released during the European session
  • U.K.’s positions papers for next week’s Brexit talks released

Major Events/Reports

U.K. Government releases position papers

The third round of Brexit talks is scheduled to begin on August 28.

In light of that, the U.K. government released its position papers during the later half of the session.

According to Brexit Secretary David Davis, the papers “will help give businesses and consumers certainty and confidence in the UK’s status as an economic powerhouse after we have left the EU.”

Reading quickly through the position paper, the agenda for next week’s negotiations is on “the availability of goods, in a way that supports the move to the freest possible future economic relationship” and “confidentiality and access to official documents.”

With regard to the availability of goods, the papers notes that “The UK has been clear that exporters and businesses need to be able to plan ahead with certainty which is why we want to seek an agreement with the EU which allows the freest and most frictionless trade possible in goods and services.”

And to that end, the U.K. government proposed the following four principles:

  • “First, to ensure the continued availability of products on EU and UK markets at the date of withdrawal, goods placed on the Single Market before exit should continue to circulate freely in the UK and the EU, without additional requirements or restrictions.”
  • “Second, to avoid unnecessary duplication of activities and provide legal certainty, where businesses have undertaken compliance activities prior to exit, they should not be required to duplicate these activities in order to place goods on the UK and the EU market after exit. This includes recognising the validity of type approvals, certificates and registrations issued prior to exit.”
  • “Third, to ensure that goods in circulation continue to comply with product legislation, and market surveillance authorities can ensure the necessary action is taken with respect to non-compliant products, the agreement should facilitate the continued oversight of goods.”
  • “Fourth, where goods are supplied with services, there should be no restriction to the provision of these services that could undermine the agreement on goods.”

Commodities broadly in the green

Commodities are starting the new trading week on a strong footing since most were in positive territory during the morning London session.

The U.S. dollar index was down by 0.07% to 93.29 for the day, which may have enticed some commodity buyers.

However, base metals were very clearly in high demand. And market analysts say that this was due to expectations that Chinese infrastructure spending will pick up, as well falling inventory levels for some base metals, which may be a sign of strengthening demand.

As mentioned earlier, base metals were in high demand and clearly outperformed.

  • Copper was up by 1.07% to $2.971 per pound
  • Nickel was up by 2.16% to $11,237.50 per dry metric ton

Oil benchmarks did okay.

  • U.S. WTI crude oil was up by 0.29% to $48.80 per barrel
  • Brent crude oil was up by 0.04% to $52.74 per barrel

Precious metals were also raking in gains.

  • Gold was up by 0.20% to $1,294.22 per troy ounce
  • Silver was up by 0.21% to $17.036 per troy ounce

Gloomy start in Europe but sentiment improving

The risk-off vibes from the earlier Asian session initially carried over into today’s morning London session.

However, the gloomy mood appeared to be wearing off as the trading session progressed, with some European equity indices already in the green after opening lower earlier.

Market analysts attributed the early risk-off vibes to sentiment spillover from the earlier Asian session amid geopolitical risk. The returning appetite for risk, meanwhile, was attributed to the metals rally, which gave mining shares a boost.

  • The pan-European FTSEurofirst 300 was already up by 0.08% to 1,470.45
  • Germany’s DAX was still down by 0.23% to 12,138.00 but off the day’s low at 12,091.00
  • The blue-chip Euro Stoxx 50 was still down by 0.26% to 3,439.50 but off the day’s low at 3,438.50

Major Market Mover(s):

GBP

The pound jumped higher when the morning London session rolled around, even though there were no apparent catalysts.

Profit-taking by pound shorts is a possibility, though, especially after last week’s pound beat-down and ahead of the Fed’s Jackson hole symposium.

Another possible reason is preemptive buying ahead of the U.K. government’s position papers since word was going around that the position papers would be released within the day.

Incidentally (well, not really), the pound later found selling pressure when the U.K. government did release its position papers, which means that a “buy the rumor, sell the news” scenario may have been in play. Although the position papers themselves may have also reminded market players that Brexit uncertainty is having a negative effect on the U.K. economy.

GBP/USD was up by 25 pips (+0.20%) to 1.2879 with 1.2899 as session high, GBP/JPY was up by 17 pips (+0.12%) to 140.44 with 140.71 as session high, GBP/NZD was up by 19 pips (+0.11%) to 1.7599 with 1.7633 as session high

EUR

The euro slid lower during the earlier Asian session, likely as a continuation of last week’s euro weakness because of disappointment over rumors that ECB Overlord Draghi (supposedly) will not give hints on the ECB’s future policy tightening plans when he talks at the U.S. Fed’s Jackson Hole jamboree.

However, the euro reversed course during the morning London session. There were no apparent catalysts, but some market analysts were pointing to cautious dip-buying.

It’s also possible that euro shorts were just covering their positions ahead of this week’s big events.

EUR/USD was up by 26 pips (+0.22%) to 1.1764, EUR/JPY was up by 22 pips (+0.17%) to 128.28, EUR/NZD was up by 21 pips (+0.13%) to 1.6075

CHF

Even though the euro was broadly higher during the morning London session, the safe-haven Swissy found itself having a tough time and ended up as the worst-performing currency of the session, likely because of the returning risk-on vibes.

NZD/CHF was up by 9 pips (+0.12%) to 0.7070, EUR/CHF was up by 28 pips (+0.24%) to 1.1367, AUD/CHF was up by 13 pips (+0.17%) to 0.7664

Watch Out For:

  • 12:30 pm GMT: Canadian wholesale sales (0.6% expected, 0.9% previous)
  • 2:30 pm GMT: CB’s Australian leading index (0.1% previous)