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Decent volatility and directional movement during today’s morning London session, with the euro jumping higher across the board near the start of the session when Markit released the latest batch of Euro Zone PMI reports.

Meanwhile, the pound was bleeding red across the board, as Brexit-related jitters and a more pessimistic outlook on the U.K. economy soured sentiment on the pound.

Risk aversion was also making a comeback in Europe during today’s session, which gave the safe-haven yen and Swissy a bullish boost. They were unable to overcome the euro, however. Well, during this session at least.

  • French flash manufacturing PMI: 55.8 vs. 54.5 expected, 54.9 previous
  • French flash services PMI: 55.5 vs. 55.9 expected, 56.0 previous
  • German flash manufacturing PMI: 59.4 vs. 57.7 expected, 58.1 previous
  • German flash services PMI: 53.4 vs. 53.4 expected, 53.1 previous
  • Euro Zone flash manufacturing PMI: 57.4 vs. 56.3 expected, 56.6 previous
  • Euro Zone flash services PMI: 54.9 vs. 55.4 expected, 55.4 previous

Major Events/Reports

Net positive Euro Zone PMI reports

Markit released a bunch of PMI reports for Germany and France, as well as the Euro Zone as a whole. And focusing on the Euro Zone as a whole, the most recent PMI readings are presenting a mixed picture for the month of August.

On one hand, the manufacturing PMI reading jumped from 56.6 to 57.4 instead of easing to 56.3. On the other hand, the services PMI reading deteriorated to 54.9 instead of holding steady at 55.4 as expected.

Markit noted that the Euro Zone’s composite PMI improved marginally from 55.7 to 55.8, though, so the PMI readings were still net positive.

Anyhow, Markit attributed the strong performance of the manufacturing sector on “output and new orders rising at sharper rates in August.” New orders growth, in particular, “was boosted by the fastest rise in exports for six-and-a-half years,” which is great news because some market analysts were expecting exports to weaken amid the euro’s recent strength.

As for the lower reading for the services PMI, Markit attributed that to “growth of activity [easing] to a seven-month low.”

Further commentary from Markit noted that:

“The latest PMI readings for the eurozone signal a continuation of the recent strong performance of the currency bloc’s economy. This stabilisation in the rate of expansion is pleasing, following signs of growth easing in recent months.”

ECB’s Draghi speaks

ECB Supreme Overlord Draghi gave a speech earlier today. And, well, he refrained from touching on the euro’s recent strength, inflation, and other relevant stuff that the market wants him to talk about.

However, he did talk about monetary policy. Although he didn’t really given any forward guidance.

Draghi only boasted that a “large body of empirical research has substantiated the success of these [monetary] policies in supporting the economy and inflation, both in the euro area and in the United States.”

However, he did sound a bit cautious when he, er, cautioned that “we must be aware of the gaps that still remain in our knowledge” of these monetary policies.

Sentiment flips back to risk-off

Risk sentiment in Europe apparently switched back to risk-off during today’s morning London session since the major European equity indices were printing losses.

According to market analysts, sentiment flipped back to risk-off today because of souring sentiment caused by the slide in European media company shares.

  • The pan-European FTSEurofirst 300 was down by 0.28% to 1,472.45
  • Germany’s DAX was down by 0.21% to 12,204.00
  • The blue-chip Euro Stoxx 50 was down by 0.25% to 3,448.00

U.S. equity futures were also weighed down by the risk-off vibes in Europe.

  • S&P 500 futures were down by 0.31 to 2,445.25
  • Nasdaq futures were down by 0.28% to 5,861.75

Major Market Mover(s):

EUR

The euro jumped higher across the board when the morning London session rolled around, apparently as a reaction to Markit’s latest batch of PMI reports, which were seen as net positive.

However, there was no broad-based follow-through buying after the initial jump. And so the euro’s price action became mixed after that.

The euro was able to hold onto its gains (for now at least), and so the euro ended up as the best-performing currency of the session.

EUR/USD was up by 43 pips (+0.37%) to 1.1799, EUR/NZD was up by 56 pips (+0.34%) to 1.6327, EUR/AUD was up by 30 pips (+0.20%) to 1.4925

GBP

The pound retreated across the board during the course of the session and ended up as the worst-performing currency of the morning London session, even though there were no direct catalysts for the pound’s weakness.

However, some market analysts were quick to pin the blame for the pound’s weakness on Brexit-related jitters and the U.K.’s poorer economic outlook amid the lack of significant progress in recent Brexit talks.

GBP/USD was down by 15 pips (-0.12%) to 1.2809, GBP/JPY was down by 51 pips (-0.37%) to 139.81, GBP/CHF was down by 37 pips (-0.30%) to 1.2379

Watch Out For:

  • 1:05 pm GMT: Dallas Fed President Robert Kaplan will speak
  • 1:45 pm GMT: Markit’s flash U.S. manufacturing PMI (53.4 expected, 53.3 previous)
  • 1:45 pm GMT: Markit’s flash U.S. services PMI (55.0 expected, 54.7 previous)
  • 2:00 pm GMT: Euro Zone consumer confidence (no change from -2 expected)
  • 2:00 pm GMT: U.S. new home sales (611K expected, 610K previous)
  • 2:30 pm GMT: U.S. crude oil inventories (-3.3M expected, -8.9M previous)