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The risk-on vibes during the morning London session apparently gave the higher-yielding currencies a lift. The Aussie, in particular, was able to finally stage a broad-based recovery after yesterday’s heavy losses. Heck, the Aussie was even the best-performing currency of the session.

However, the same risk-on vibes took a heavy toll on the safe-haven currencies, especially the yen.

As for other currencies of note, up first is the pound since it had choppy price action but was the third weakest currency of the session ahead of Theresa May’s speech.

Another noteworthy currency was the euro since it jumped higher when the latest batch of PMI reports exceeded expectations, but got pushed back down again later, apparently as a reaction to Draghi’s comment that inflation is just “not there” yet.

  • French final GDP q/q: unchanged at 0.5% as expected
  • French final GDP y/y: 1.8% vs. unchanged at 1.7% expected
  • German flash manufacturing PMI: 60.6 vs. 59.0 expected, 59.3 previous
  • German flash services PMI: 55.6 vs. 53.7 expected, 53.5 previous
  • French flash manufacturing PMI: 56.0 vs. 55.5 expected, 55.8 previous
  • French flash services PMI: 57.1 vs. 54.8 expected, 54.9 previous
  • Euro Zone flash manufacturing PMI: 58.2 vs. 57.2 expected, 57.4 previous
  • Euro Zone flash services PMI: 55.6 vs. 54.8 expected, 54.7 previous
  • British PM Theresa May speaks later
  • Canada’s CPI and retail sales reports coming up

Major Events/Reports

Positive Euro Zone PMI reports

Markit released the latest batch of PMI reports for Germany and France, as well as the Euro Zone as a whole.

And according to the PMI report for the Euro Zone as a whole, the Euro Zone’s flash manufacturing PMI jumped from 57.4 to 58.2, which is 79-month high. It gets even better because the consensus was for the reading to ease to 57.2.

The Euro Zone’s flash PMI, meanwhile, improvied from 54.7 to a four-month high of 55.6, beating expectations that it would only edge higher to 54.8.

According to commentary from Markit, “The goods-producing sector was again buoyed by rising exports.”

Moreover, “The need to boost capacity resulted in the second largest increase in employment recorded by the survey over the past decade, falling just shy of March’s post-crisis peak.”

With regard to input costs, Markit noted that “Input cost and selling price inflation gathered pace for a second successive month, with both reaching the highest rates since April.”

More importantly, companies are passing on their higher input costs since “Prices charged for services rose to the greatest extent since May, while the increase in factory gate prices was the joint-highest since June 2011.”

ECB’s Draghi speaks

ECB Overlord Mario Draghi gave a scheduled speech earlier. The speech itself wasn’t really market-moving since Draghi mostly talked about youth unemployment and didn’t really talk about monetary policy or the euro.

However, Draghi did talk did talk a bit about monetary policy after his prepared speech. And the he first talked about the ECB’s mandate, which is price stability, before saying that inflation rates “are not there” yet.

Some risk-taking to end the week

The risk-off vibes from the earlier Asian session initially spilled over into the European session since the major European equity indices opened in the red.

However, it soon became clear that risk appetite was making a comeback as the session progressed since the major European equity indices began erasing their losses. In fact, most were already printing gains by the time the morning London session ended.

The early risk-off vibes were quite naturally blamed on renewed North Korean jitters. As for the returning risk-on vibes, well, market analysts attributed that to easing jitters related to North Korea without really explaining why.

  • The pan-European FTSEurofirst 300 was up by 0.11% to 1,506.21
  • Germany’s DAX was up by 0.29% to 12,636.50
  • The blue-chip Euro Stoxx 50 was up by 0.27% to 3,552.00

Major Market Mover(s):

AUD

After bleeding out heavily yesterday, the Aussie was able to stage a broad-based recovery during today’s morning London session. In fact, the Aussie was the best-performing currency of the session.

Commodities were mixed during the session, so aside from profit-taking by yesterday’s shorts, there was really no major catalyst for the Aussie’s broad-based recovery. However, risk appetite did return during the morning London session and that apparently gave the higher-yielding Aussie a lift.

AUD/USD was up by by 27 pips (+0.35%) to 0.7976, AUD/JPY was up by 44 pips (+0.50%) to 89.35, AUD/CHF was up by 33 pips (0.44%) to 0.7726

JPY

The risk-friendly environment may have helped the higher-yielding currencies, particularly the Aussie. However, the same risk-on vibes weighed down on the safe-havens, with the yen apparently taking the brunt of it since the yen was the worst-performing currency of the session.

USD/JPY was up by 88 pips (+0.16%) to 112.07, NZD/JPY was up by 41 pips (+0.51%) to 82.11, CAD/JPY was up by 32 pips (+0.35%) to 91.30

Watch Out For:

  • 12:30 pm GMT: Canadian CPI (0.2% expected, 0.0% previous)
  • 12:30 pm GMT: Headline (0.2% expected, 0.1% previous) and core (0.4% expected, 0.7% previous) readings for Canada’s retail sales
  • 1:30 pm GMT: Theresa May’s Brexit speech
  • 1:30 pm GMT: Kansas City Fed President Esther George will speak
  • 1:45 pm GMT: Markit’s flash U.S. manufacturing PMI (53.0 expected, 52.8 previous)
  • 1:45 pm GMT: Markit’s flash U.S. services PMI (55.8 expected, 56.0 previous)