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Trading conditions were rather tight during today’s morning London session, likely because market players are waiting for today’s BOC statement and tomorrow’s ECB statement.

It wasn’t a complete snooze fest, however, since the pound was on the move. The pound was the only real mover, though.

  • German factory orders m/m: -0.7% vs. 0.2% expected, 0.9% previous
  • Italian retail sales m/m: -0.2% as expected vs. 0.6% previous
  • Euro Zone retail PMI m/m: 50.8 vs. 51.0 previous
  • U.S. and Canadian trade data coming up
  • BOC statement later

Major Events/Reports

Tight trading conditions

Trading conditions were tight during the session, with directional movement and volatility both in short supply, likely because market players are behaving themselves while waiting for the BOC’s monetary policy decision later, as well as tomorrow’s ECB statement.

By the way, you can read up on Forex Gump’s write-up on the BOC statement here. And while you’re at it, and if you need to get up to speec on what’s expected for the ECB statement as well, then you may want to read up on his write-up on that as well. You can read his write-up on the upcoming ECB statement here.

Commodities climb, oil outperforms

Yesterday’s commodities rally lost steam later on, thanks to profit-taking. That’s not stopping commodities from trying to climb higher today, however, with oil leading the way.

Precious metals were in the green, although returning risk-on vibes shaved safe-haven gold’s gains

  • Gold was up by 0.04% to $1,345.05 per troy ounce
  • Silver was up by 0.65% to $18.058 per troy ounce

Base metals were mostly in positive territory.

  • Copper was up by 0.45% to $3.142 per pound
  • Nickel was up by 0.19% to $12,007.50 per dry metric ton

Oil benchmarks clearly outperformed.

  • U.S. WTI crude oil was up by 1.05% to $49.17 per barrel
  • Brent crude oil was up by 1.44% to 54.15 per barrel

The U.S. dollar was mixed for the session but the U.S. dollar index was down by 0.09% to 92.20 for the day when the session was just about to end. And that likely helped to stoke demand for commodities.

However, some market analysts also pointed to low inventory levels for certain base metals and expectations that companies will restock as sustaining demand for base metals.

Oil’s strong performance, meanwhile, was attributed by market analysts to the resumption of operations by refineries in the wake of Hurricane Harvey, which is expected to spur demand for crude oil, as well as expected supply disruptions because of Hurricane Irma.

Risk aversion fading in Europe

Signs of risk-taking during yesterday’s morning London session were drowned in a deluge of risk aversion during the afternoon London session and U.S. session, as financials got hit hard ahead of the ECB statement.

And in today’s morning London session, the same theme played out early on since financials continued to slump, souring overall risk sentiment.

However, risk sentiment began to improve later. Some of the European equity indices were even printing gains already after suffering losses earlier.

As to what revived risk sentiment, that’s not clear for now. However, the basic materials sector clearly outperformed, so the commodities rally likely stoked demand for mining and energy shares.

  • The pan-European FTSEurofirst 300 was still down by 0.13% to 1,466.45 but off the day’s low at 1,459.98.
  • Germany’s DAX was already up by 0.56% to 12,191.00
  • The blue-chip Euro Stoxx 50 was already up by 0.14% to 3,427.50

U.S. equity futures were also already in the green, which means that risk appetite is really getting revived (for now at least).

  • S&P 500 futures were already up by 0.14% to 2,463.25
  • Nasdaq futures were were already up by 0.22% to 5,953.12

Major Market Mover(s):

GBP

Most currency pairs had choppy price action, but pound pairs knew where to go – up (that’s down on EUR/GBP). There were no apparent catalysts for the pound’s strength, but some market analysts pointed to profit-taking by pound shorts ahead of the parliamentary debate in the U.K. with regard to the E.U. repeal bill, which is scheduled for tomorrow.

GBP/USD was up by 23 pips (+0.18%) to 1.3043, GBP/AUD was up by 36 pips (+0.22%) to 1.6350, GBP/NZD was up by 47 pips (+0.26%) to 1.8072

Watch Out For:

  • 12:30 pm GMT: U.S. trade balance (-$44.6B expected, -$43.6B previous)
  • 12:30 pm GMT: Canada’s trade balance (-$3.3B expected, -$3.6B previous) and quarterly labor productivity (0.9% expected, 1.4% previous)
  • 1:45 pm GMT: Markit’s final U.S. services PMI (56.8 expected, 56.9 previous)
  • 2:00 pm GMT: BOC statement (overnight rate steady at 0.75% expected); read Forex Gump’s write-up on that here
  • 2:00 pm GMT: ISM’s U.S. non-manufacturing PMI (55.5 expected, 53.9 previous)
  • 6:00 pm GMT: U.S. Fed’s “Beige Book” will be released