Today was another choppy morning London session, but there was decent enough price action since the pound got slapped lower when it was revealed that the U.K.’s Q2 GDP growth was downgraded.
Meanwhile, the euro caught a bid and was the best-performing currency while the commodities rout weighed on the comdolls.
- German retail sales m/m: -0.4% vs. 0.5% expected, 0.6% previous
- U.K. Nationwide HPI m/m: 0.2% vs. 0.1% expected, -0.1% previous
- French preliminary CPI m/m: -0.1% vs. -0.2% expected, 0.5% previous
- Swiss KOF economic barometer: 105.8 vs. 105.5 expected, 104.2 previous
- The U.K.’s current account: -£23.2B vs. -£15.8B expected, -£22.3B previous
- U.K. final Q2 GDP q/q: no revision from +0.3% as expected
- U.K. final Q2 GDP y/y: 1.5% vs. unchanged at 1.7% previous
- Euro Zone flash CPI y/y: 1.5% vs. 1.6% expected, 1.5% previous=
- Euro Zone flash core CPI y/y: 1.1% vs. 1.2% expected, 1.2% previous
BOE’s Carney speaks
BOE Guv’nah Mark Carney was interviewed by the BBC earlier. And, well, Carney maintained that the BOE has a hawkish bias and even hinted at a rate hike in the “relatively near term.”
To quote directly from the Guv’nah himself:
“If the economy continues on the track that it’s been on, and all indications are that it is, in the relatively near term we can expect that interest rates will increase.”
However, Carney also reiterated his previous comment that when or if rate hikes come, they will be “limited” and “gradual”.
“We’re talking about just easing the foot off the accelerator to keep with the speed limit of the economy and so interest rate increases when they come – when and if they come – will be to a limited extent and gradual.”
U.K. final Q2 GDP report
The final estimate for the U.K.’s Q2 GDP was released earlier today. And while the quarter-on-quarter reading was unchanged at +0.3%, the year-on-year reading was unfortunately downgraded from +1.7% to +1.5%.
This is the weakest annual reading since Q1 2013. Moreover, it resumed the trend of ever slower year-on-year growth since annual GDP growth topped out at 3.3% back in Q4 2014.
Not only that, growth over the first half of 2017 comes in at 0.7%, which is the most anemic growth during the first half of the year since the first half of 2012.
On a slightly more upbeat note, business investment in Q2 did get upgraded to show a 0.5% increase (+0.0% originally). Business investment growth for Q1 was even upgraded as well (+0.8% vs. +0.6% previous).
Precious metals steady as other commodities fall
Commodities were beating a hasty retreat during today’s morning London session. However, not all commodities were fleeing since precious metals held firm and were able to preserve some of their gains.
There was no clear reason for the broad-based commodities rout, however. Heck, the U.S. dollar index was even down by 0.10% to 92.86 for the day when the session ended, which should have attracted some buyers.
Precious metals held their ground but off their respective highs for the day.
- Gold was up by 0.09% to $1,289.92 per troy ounce
- Silver was up by 0.04% to $16.854 per troy ounce
Oil benchmarks took hits.
- U.S. WTI crude oil was down by 0.29 to $51.41 per barrel
- Brent crude oil was down by 0.61% to $56.81 per barrel
Base metals were actually mixed but most were off their highs and many were even in negative territory already.
- Copper was down by 0.34% to $2.971 per pound
- Aluminum was down by 0.36% to $2,132.00 per dry metric ton
It’s the last trading day of the month, so some month-end capital flows are to expected as hedge funds, mutual funds, pension funds, and other large players rebalance their portfolios and/or prepare to make cash distributions. Also, month-end flows help to explain some of the rather wonky price action during the session, namely the wonky price action on the euro.
Major Market Mover(s):
The pound barely reacted to Carney’s hawkish comments during the BBC interview since the Guv’nah basically repeated what he already said this week. The pound, however, apparently reacted to Carney’s more dovish comments since the pound began to encounter selling pressure ahead of the U.K’s GDP report.
And when the GDP report was finally released, the pound got a beating and was kicked sharply lower likely because the U.K.’s final GDP report revealed an unexpected downgrade for the year-on-year reading.
GBP/USD was down by 30 pips (-0.23%) to 1.3384, GBP/JPY was down by 55 pips (-0.37%) to 150.54, GBP/CHF was down by 32 pips (-0.24%) to 1.2978
The euro was the best-performing currency of the morning London session. There was no clear reason for the euro’s strength, however, and the Euro Zone’s flash CPI reports were even a miss. Perhaps month-end flows were in play?
EUR/USD was up by 16 pips (+0.14%) to 1.1812, EUR/CAD was up by 20 pips (+0.13%) to 1.4685, EUR/AUD was up by 34 pips (+0.23%) to 1.5073
Watch Out For:
- 12:30 pm GMT: Canada’s monthly GDP (0.1% expected, 0.3% previous)
- 12:30 pm GMT: Canada’s RMPI (0.4% expected, -0.6% previous) and IPPI (0.5% expected, -1.5% previous)
- 12:30 pm GMT: U.S. core PCE price index (0.2% expected, 0.1% previous), personal spending (0.1% expected, 0.3% previous), and personal income (0.2% expected, 0.4% previous)
- 1:15 pm GMT: ECB Overlord Draghi will give a speech
- 1:45 pm GMT: Chicago PMI (58.7 expected, 58.9 previous)
- 2:00 pm GMT: BOE Guv’nah is expected to give another speech
- 2:00 pm GMT: University of Michigan’s revised consumer sentiment (no change from 95.3 expected)
- 3:00 pm GMT: Philadelphia Fed President Patrick Harker will speak