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Even though there wasn’t much on the docket, today’s morning London session was action-packed, with the pound getting whupped across the board because of Brexit-related jitters while the Greenback staged a broad-based recovery.

As for the other currencies, the Loonie was the second worst-performing currency after the pound, probably because of the slide in oil prices, as well as unwinding by Loonie bulls ahead of BOC Wilkins’ speech later.

The risk-off vibes, meanwhile, allowed the yen to fight the good fight and emerge as the second strongest currency of the morning London session.

The safe-haven Swissy also did relatively well, but was outclassed by the euro, thanks to the stronger-than-expected readings for industrial production in the Euro Zone, some market analysts say. Although cautious optimism ahead of Draghi’s speech is also a possibility.

As for the Kiwi and Aussie, they were mixed but net losers, probably because non-oil commodities were in rally mode but demand for the two higher-yielding comdolls were dampened by the risk-off vibes.

  • French final HICP m/m: -0.2% vs. no change from -0.1% expected
  • French final HICP y/y: no revision from +1.1% as expected
  • Euro Zone industrial production m/m: 1.4% vs. 0.5% expected, 0.3% previous
  • Euro Zone industrial production y/y: 3.8% vs. 2.6% expected, 3.6% previous
  • Lots of central bankers will be speaking later, including ECB Overlord Draghi

Major Events/Reports

BOE’s Q3 credit conditions survey

The BOE released its credit conditions survey for Q3 2017 near the start of the morning London session.

And according to the report, “The availability of secured credit to households was reported to have increased slightly in the three months to mid-September 2017. This was focused on borrowers with low loan to value ratios (75% or less) and was driven by lenders’ market share objectives. Lenders expected availability to be unchanged over the next three months to mid-December.”

However, the report also noted that “Lenders reported that the availability of unsecured credit to households decreased in Q3 and expected a significant decrease in Q4.”

And looking at the chart included in the report, it looks like lenders expect unsecured consumer credit availability to contract at the largest pace since Q4 2008.

These findings indicate the financial conditions are tightening and are expected to continue to tighten, which is not really very favorable for rate hike odds. After all, hiking rates would only serve to make loans even more expensive than they already are.

Brexit-related rhetoric

U.K. Brexit secretary David Davis and Michel Barnier, the E.U.’s top Brexit negotiator, held a press conference earlier in order to conclude the fifth round of Brexit talks.

And, well, it didn’t go very well (for pound bulls).

To begin with, Barnier stressed that “no concessions” will be made, referring to the E.U.’s demands on citizens’ rights and Northern Ireland. And with regard to the bill that the U.K. has to pay up before leaving the E.U., Barnier had this to say:

“On this question we have reached a state of deadlock which is very disturbing for thousands of project promoters in Europe and it’s disturbing also for taxpayers.”

Worse, Barnier communicated that a trade deal would not be discussed any time soon when he said that:

“I am not able in the current circumstances to propose next week to the European Council that we should start discussions on the future relationship.”

For his part, Davis said that “there is still work to be done, much work to be done,” although he also quick to add that the U.K. and the E.U. “have come a long way.”

And with regard to the U.K.’s bills specifically, Davis said that:

“In line with the process agreed at our last round of talks, we have undertaken a rigorous examination of the technical detail where we need to reach a shared view. This is not a process of agreeing specific commitments – we have been clear this can only come later.”

In short, the Brexit is not yet ready to pay and the specifics on the U.K.’s financial obligations should only be fleshed out later.

Slight risk aversion in Europe

Most of the major European equity indices were trading somewhat flat earlier but began getting sellers later and were already in the red by the end of the morning London session.

As such, it looks like risk aversion was the more dominant sentiment in Europe, at least during the session.

There was no clear reason for the returning risk-off vibes. However, market analysts highlight that banking shares were already showing weakness earlier when the major European bourses were trading sideways, so it’s possible that yesterday’s FOMC minutes were weighing on banking shares.

  • The pan-European FTSEurofirst 300 was down by 0.10% to 1,532.20
  • Germany’s DAX was still down by 0.06% to 12,963.00
  • The blue-chip Euro Stoxx 50 was down by 0.20% to 3,600.50

The risk-off vibes also weighed on U.S. equity futures.

  • S&P 500 futures were down by 0.14% to 2,549.38
  • Nasdaq futures were down by 0.05 to 6,080.13

Major Market Mover(s):

GBP

The pound encountered sellers right from the get-go, although it’s not clear if this was a reaction to the BOE’s latest credit conditions survey or unwinding by pound bulls ahead of Barnier’s and Davis’ joint conference (probably both).

However, the pound did get a noticeable bearish infusion when the press conference got underway, especially after Barnier said that there was a deadlock in the Brexit negotiations because of the U.K.’s refusal to pay its divorce bill.

GBP/USD was down by 109 pips (-0.83%) to 1.3138, GBP/CHF was down by 82 pips (-0.64%) to 1.2800, GBP/JPY was down by 121 pips (-0.81%) to 147.56

USD

The Greenback staged a broad-based recovery during today’s morning London session. There were no apparent catalysts for the broad-based recovery, but it’s possible that Greenback bears were taking profits off the table ahead of the table ahead of the PPI report for later and tomorrow’s CPI and retail sales report.

By the way, you may wanna check out Forex Gump’s Two Top-Tier Reports For Your USD Trades This Friday, if you want to get up to speed on tomorrow’s U.S. CPI and retail sales reports.

USD/JPY was up by 8 pips (+0.07%) to 112.30, USD/CAD was up by 33 pips (+0.27%) to 1.2471, USD/CHF was up by 19 pips (+0.20%) to 0.9742

Watch Out For:

  • 12:30 pm GMT: Canada’s NHPI (0.3% expected, 0.4% previous)
  • 12:30 pm GMT: Headline (0.4% expected, 0.2% previous) and core (0.2% expected, 0.1% previous) readings for U.S. PPI
  • 12:30 pm GMT: U.S. initial jobless claims (251K expected, 260K previous)
  • 2:30 pm GMT: ECB Overlord Draghi is scheduled to speak
  • 2:30 pm GMT: Fed Governors Lael Brainard and Jerome Powell will be speaking
  • 3:00 pm GMT: U.S. crude oil inventories (-1.9M expected, -6.0M previous)
  • 7:15 pm GMT: BOC Senior Deputy Governor Carolyn Wilkins will speak
  • 9:30 pm GMT: BNZ’s manufacturing index (57.9 previous)