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Trading conditions were relatively tight during today’s morning London session, with many pairs trading sideways. However, the pound was clearly on the move, thanks to easing political uncertainty in the U.K., as well as upgraded readings for the U.K.’s unit labour costs, which apparently rejuvenated rate hike expectations.

  • German industrial production m/m: 2.6% vs. 0.8% expected, 0.0% previous
  • German industrial production y/y: 4.7% vs. 2.9% expected, 4.0% previous
  • French BoF business sentiment: 104.0 vs. 105.0 expected, 104.0 previous
  • Sentix Euro Zone investor confidence: 29.7 vs. 28.0 expected, 28.2 previous
  • U.K. PM May is expected to speak later

Major Events/Reports

U.K. labor costs upgraded!

The U.K. Office for National Statistics (ONS) released an updated version of last week’s labour productivity report after it was discovered that the ONS used outdated data for its calculations.

According to the revised labour productivity report, unit labour costs in the U.K. surged by 3.5% in Q1 2017 (2.1% originally), which is the fastest in four years. The reading for Q2, meanwhile, was upgraded from +1.6% to +2.4%, which is the second strongest reading since Q2 2013.

More importantly, the reading for Q2 is much better than the BOE’s forecast of +1.0%, as laid out in the August Inflation Report.

And according to some market analysts, this caused odds for a November BOE rate hike to rise.

Snippets of Theresa May’s speech

U.K. Prime Minister Theresa May will be giving a speech and answering question in Parliament later.

However, the BBC somehow managed to get an early preview of Theresa May’s speech for later.

And according to the BBC’s report, Theresa May will supposedly call for a “new, deep and special partnership between a sovereign United Kingdom and a strong and successful European Union“.

May will also supposedly ask the E.U. for its cooperation by saying that “Achieving that partnership will require leadership and flexibility, not just from us but from our friends, the 27 nations of the EU.”

In addition, May is expected to stress the need for a “spirit of friendship and co-operation” but she will also supposedly say that: “I believe we can seize the opportunities of this defining moment in the history of our nation.”

Finally, May will supposedly tell the E.U. that:

“And as we look forward to the next stage, the ball is in their court. But I am optimistic we will receive a positive response.”

Optimistic start in Europe

Europe is apparently starting the new trading week on an optimistic note, since the major European equity indices were raking in gains during today’s morning London session.

And according to market analysts, the risk-friendly environment in Europe was due to risk sentiment spillover because of the Chinese equities rally from earlier, as well as strong German industrial production readings that boosted demand for German stocks.

  • The pan-European FTSEurofirst 300 was up by 0.17% to 1,533.42
  • Germany’s DAX was still up by 0.07% to 12,965.50
  • The blue-chip Euro Stoxx 50 was up by 0.25% to 3,610.50

The risk-on vibes also kept U.S. equity futures well-supported, so the risk-on vibes may carry over into the upcoming U.S. session.

  • S&P 500 futures were up by 0.17% to 2,549.38
  • Nasdaq futures were up by 0.22% to 6,077.38

Major Market Mover(s):

GBP

Many currency pairs were in a stupor during today’s morning London session. However, the pound was up and about as it crushed all opposition and emerged as the one currency to rule them all, not just during the session but for the day (so far) as well.

Aside from news over the weekend that Theresa May plans to reshuffle her cabinet to have stronger control in government, snippets of Theresa May’s speech were also leaked, showing a somewhat conciliatory tone that likely helped to ease political uncertainty and Brexit-related jitters.

Moreover, there were rumors circulating earlier that the ONS will supposedly issue corrections because it made a mistake when calculating the U.K.’s unit labor costs. And as mentioned earlier, those rumors turned out to be true because the ONS did just that.

GBP/USD was up by 65 pips (+0.50%) to 1.3172, GBP/JPY was up by 81 pips (+0.55%) to 148.41, GBP/CHF was up by 76 pips (+0.60%) to 1.2896

JPY & CHF

While not as flashy as the pound’s upward surge, the yen and the Swissy were also busting the moves – to the downside. In fact, the Swissy was the worst-performing currency of the session, very likely because of the risk-on vibes. The yen was a close second, though, likely because of the same reasons.

USD/JPY was up by 7 pips (+0.07%) to 112.67, EUR/JPY was up by 31 pips (+0.24%) to 132.34, NZD/JPY was up by 16 pips (+0.20%) to 79.79

USD/CHF was up by 9 pips (+0.10%) to 0.9790, EUR/CHF was up by 31 pips (+0.27%) to 1.1501, NZD/CHF was up by 16 pips (+0.23%) to 0.6934

Watch Out For:

  • 2:30 pm GMT:  U.K. Prime Minister Theresa May is expected to speak
  • Thanksgiving Day holiday in Canada today
  • Columbus Day holiday in the U.S. today