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The Greenback was the one currency to rule them all during the morning London session, even though there were no direct catalysts for the Greenback’s strength.

The main losers, meanwhile, were the higher-yielding Kiwi and Aussie, even though risk-taking made a strong comeback during the session.

  • Swiss trade balance: CHF 3.51B vs. CHF 2.88B expected, CHF 2.76B previous
  • U.K. public sector net borrowing: -£0.8B vs. £0.0B expected, £5,7B previous
  • German ZEW economic sentiment: 10.0 vs. 14.8 expected, 17.5 previous
  • Euro Zone ZEW economic sentiment: 29.3 vs. 34.2 expected, 35.6 previous
  • U.K. CBI industrial order expectations: 13 vs. 8 expected, 10 previous

Major Events/Reports

Base metals defy commodities rout

After yesterday’s promising start to the new trading week, commodities turned tail and went south during today’s morning London session. The commodities rout wasn’t total and complete, however, since base metals resisted and even actually raked in more gains.

And that may be the reason for the commodities rout since a stronger U.S. dollar means that globally-traded commodities become relatively more expensive.

As to why base metals defied the commodities rout and climbed higher instead, market analysts attributed that to heavy speculation and technicals since they can’t really pinpoint a fundamental reason for the high demand for base metals.

Oil benchmarks were in the red.

  • U.S. WTI crude oil was down by 0.17% to $47.45 per barrel
  • Brent crude oil was down by 0.21% to $51.55 per barrel

Precious metals were suffering.

  • Gold was down by 0.48% to $1,290.44 per troy ounce
  • Silver was down by 0.12% to $16.994 per troy ounce

Most base metals, meanwhile, had another very good day.

Copper was up by 0.79% to $3.004 per pound

  • Nickel was up by 1.10% to $11,472.50 per dry metric ton
  • The U.S. dollar index was up by 0.41% to 93.38 for the day when the session ended.

Iron ore pares gains

Base metals did well during the morning London session. However, it wasn’t a complete sweep for base metals since some base metals fell behind.

One such industrial metal is iron. And you can see in the chart below, iron ore extended its gains during the earlier Asian session but tanked during today’s morning London session. Aside from profit-taking, there’s no clear catalysts, though.

AUD/USD vs. Iron Ore (Black Line): 1-Hour Chart
AUD/USD vs. Iron Ore (Black Line): 1-Hour Chart

Risk-taking in Europe

There were signs of recovering risk sentiment during yesterday’s morning London session. However, risk sentiment didn’t really fully recover.

No worries, though, since risk-taking clearly made a comeback during today’s morning London.

And according to market analysts, mining shares clearly outperformed and helped to improve overall risk sentiment, thanks to higher base metal prices and positive earnings reports for some European mining companies.

  • The pan-European FTSEurofirst 300 was up by 0.54% to 1,471.25
  • Germany’s DAX was up by 0.76% to 12,157.50
  • The blue-chip Euro Stoxx 50 was up by 0.55% to 3,440.50

U.S. equity futures also got a lift from the risk-friendly environment.

  • S&P 500 futures were up by 0.13% to 2,431.25
  • Nasdaq futures were up by 0.35% to 5,814.38

Major Market Mover(s):

USD

The mighty Greenback ruled all during the morning London session. In fact, the Greenback is also currently on track to being today’s champ.

There are no clear catalysts for the Greenback’s strength, though. And market analysts only point out that the Greenback was broadly in demand but can’t really pinpoint a reason as to why. Although one possible reason is optimism that Fed Head Yellen will say nice things during the Jackson Hole Symposium.

EUR/USD was down by 22 pips (-0.19%) to 1.1767, NZD/USD was down by 34 pips (-0.47%) to 0.7280, GBP/USD was down by 47 pips (-0.37%) to 1.2827

AUD & NZD

The risk-on vibes during the session were not enough to entice AUD and NZD bulls to jump in and support the two higher-yielding currencies, so much so that the two currencies ended up as the worst-performing currencies of the session. Heck, the Kiwi is even the worst-performing currency of the day (so far).

One likely reason as to why the two comdolls fared rather poorly is the commodities rout. Sure base metals were in demand, but demand was not across the board since iron ore, Australia’s main commodity export, was in retreat during the session and is likely why the Aussie suffered.

As for the Kiwi’s weakness, a sympathy move with the Aussie is a possibility since Australia is New Zealand’s second largest export market.

AUD/USD was down by 35 pips (-0.44%) to 0.7904, AUD/JPYw as down by 41 pips (-0.47%) to 86.49, AUD/CHF was down by 34 pips (-0.44%) to 0.7631

NZD/CHF was down by 32 pips (-0.46%) to 0.7029, NZD/JPY was down by 38 pips (-0.48%) to 79.63, NZD/CAD was down by 29 pips (-0.32%) to 0.9157

Watch Out For:

  • 12:30 pm GMT: Headline (0.2% expected, 0.6% previous) and core (0.0% expected, -0.1% previous) reading for Canadian retail sales
  • 1:00 pm GMT: CB’s Chinese leading index (1.6% previous)
  • 1:00 pm GMT: U.S. HPI (0.5% expected, 0.4% previous)
  • 2:00 pm GMT: Richmond Fed’s manufacturing index (11 expected, 14 previous)