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Price action was rather choppy today, but the yen clearly dominated, apparently because of the risk-off vibes.

The Greenback, meanwhile, extended its losses from earlier and closed broadly lower against its peers.

As for the other currencies, the pound is worth mentioning because it had a mixed start but tried to jump higher later when the U.K.’s services PMI report managed to beat expectations. However, the details of the PMI report were not as upbeat, and so follow-through buying didn;t materialize and the pound ended up trading mostly sideways.

  • Spanish services PMI: 56.7 vs. 55.5 expected, 56.0 previous
  • Italian services PMI: 53.2 vs. 54.8 expected, 55.1 previous
  • French final services PMI: 57.0 vs. no change from 57.1 expected
  • German final services PMI: unchanged at 55.6 as expected
  • Euro Zone final services PMI: 55.8 vs. unchanged at 55.6 expected
  • U.K. services PMI: 53.6 vs. steady at 53.2 expected
  • Euro Zone retail sales m/m: -0.5% vs. 0.3% expected, -0.3% previous

Major Events/Reports

U.K. services PMI improves slightly

The U.K.’s latest manufacturing and construction PMI readings have been rather disappointing.

Fortunately, the U.K.’s latest services PMI report took away some of the disappointment since the headline reading improved slightly to 53.6 instead of holding steady at 53.2 as expected.

According to commentary from Markit, the slightly stronger reading was due to “a continued upturn in business activity across the UK service sector.”

However, the other details of the PMI report were not as upbeat.

Despite the upturn in business activity, for example, “the rate of expansion edged up only slightly since August and remained weaker than seen on average in the first half of the year.”

Moreover, “Relatively subdued domestic demand acted as a drag on activity growth, with the latest rise in incoming new work the slowest for 13 months.”

In addition, businesses were wary of investing in new projects. And according to Markit, most survey respondents said that “The pressure of Brexit and resulting uncertainty were at the heart of this indecision.”

On a more optimistic note (for inflation), “service providers remained under pressure from sharply rising operating expenses, which contributed to the fastest rate of prices charged inflation since April.”

Commodities recover but oil sinks further

Commodities were finally able to bounce back after getting pummeled recently. However, not all commodities joined the recovery party since oil benchmarks continued to bleed out.

Precious metals were shining.

  • Gold was up by 0.30% to $1,281.70 per troy ounce
  • Silver was up by 0.98% to $16.813 per troy ounce

Base metals were also broadly in the green.

  • Copper was down by 0.05% to $2.962 per pound
  • Nickel was down by 0.65% to $10,802.50 per dry metric ton

Oil benchmarks, meanwhile, continued to sink.

  • U.S. WTI crude oil was down by 0.38 to $50.23 per barrel
  • Brent crude oil was down by 0.39% to $55.78 per barrel

The recent commodities slide was pinned mainly on the Greenback’s strength.

And since the Greenback was down for the session (and for the day), it’s highly likely that the Greenback’s weakness attracted bargain buyers.
After all, a weaker Greenback means that globally-traded commodities that are denominated in U.S. dollars become relatively cheaper.

And for reference, the U.S. dollar index was down by 0.31% to 93.13 for the day by the end of the morning London session.

As to why oil continued to sink, market analysts are still pointing to worries that oil’s recent rally may not be sustainable because of rising U.S. oil output.

Risk aversion in Europe

The major European equity indices were mostly in negative territory during today’s morning London session, so aversion to risk seemed to be the more dominant sentiment.

As to why risk aversion prevailed, market analysts blamed that on lingering worries and rising political risk from the fallout of the Catalonian independence referendum.

  • The pan-European FTSEurofirst 300 was down by 0.36% to 1,529.85
  • Germany’s DAX was down by 0.06% to 12,895.00
  • The blue-chip Euro Stoxx 50 was down by 0.38% to 3,585.50

Even U.S. equity futures felt the bearish pressure.

  • S&P 500 futures were down by 0.05% to 2,530.38
  • Nasdaq futures were down by 0.13% to 5,988.88

Major Market Mover(s):

USD

The Greenback extended its losses from the earlier Asian session and was even the worst-performing currency of the morning London session.

There were no fresh catalysts, but market analysts are still blaming the Greenback’s slide on earlier rumors that not-so-hawkish Fed Governor Jerome Powell may replace Yellen as Fed Head.

EUR/USD was up by 16 pips (+0.14%) to 1.1780, NZD/USD was up by 13 pips (+0.19%) to 0.7184, AUD/USD was up by 12 pips (+0.15%) to 0.7865

JPY

The prevalence of risk aversion apparently gave the yen a boost, allowing the safe-haven to claim the title of “pip champion” of the morning London session.

USD/JPY was down by 25 pips (-0.23%) to 112.37, CHF/JPY was down by 14 pips (-0.12%) to 115.64, CAD/JPY was down by 7 pips (-0.08%) to 90.22

Watch Out For:

  • 12:15 pm GMT: ADP’s U.S. non-farm payrolls (135K expected, 237K previous)
  • 1:45 pm GMT: Markit’s final U.S. services PMI (no change from 55.1 expected)
  • 2:00 pm GMT: ISM U.S. non-manufacturing PMI report (55.5 expected, 55.3 previous)
  • 2:30 pm GMT: U.S. crude oil inventories (-0.5M expected, -1.8M previous)
  • 5:15 pm GMT: ECB Overlord Draghi will speak
  • 7:15 pm GMT: Fed Head Yellen will give a speech