The Greenback extended its gains from earlier. However, the safe-haven yen gave the Greenback a hard time while the Swissy even managed to edge out a win against the Greenback, likely because of the risk-off vibes during the session.
The commodities rout, meanwhile, took a heavy toll on the comdolls (AUD, NZD, CAD), with the Aussie apparently taking the most damage since the Aussie was the worst-performing currency of the morning London session.
- German industrial production m/m: -1.6% vs. -0.7% expected, 2.6% previous
- German industrial production y/y: 3.6% vs. 4.5% expected, 4.7% previous
- Swiss foreign currency reserves: CHF 742B vs. CHF 724B previous
- Halifax U.K. HPI m/m: 0.3% vs. 0.2% expected, 0.8% previous=
- Euro Zone retail PMI: 51.1 vs. 52.3 previous
- Euro Zone retail sales m/m: 0.7% vs. 0.6% expected, -0.1% previous
- Fed Head (for now) Janet Yellen will speak later
- BOC Boss-Man Poloz will also speak
According to a widely-circulated Bloomberg report that quoted “euro-area central-bank officials familiar with the matter,” Benoit Coeure, Jens Weidmann, and Francois Villeroy de Galhau “recommended tying the overall level of monetary stimulus — rather than just asset purchases — to the outlook for prices.”
ECB Chief Economist Peter Praet supposedly opposed this call for change to the ECB’s forward guidance on its entire monetary stimulus, however, which is why we only got the tapered QE extension.
ECB’s Draghi speaks
ECB Overlord Draghi gave a short speech earlier today at the second ECB Forum on Banking Supervision.
And while Draghi talked mostly about banking supervision (since that was the focus of the forum), Draghi also touched upon monetary policy a bit in connection with banking supervision.
And according to the Draghster, stronger banking supervision in the Euro Zone “has improved the transmission of [the ECB’s monetary] policy impulses through banks.”
Second, Draghi said that stronger banking supervision “has supported our monetary policy is by helping contain any financial stability risks that may emerge during a long period of low rates.”
Moreover, Draghi pointed out that the ECB has “seen little evidence that negative interest rates are undermining bank profitability.” In fact, “net interest income has remained quite stable over the past two years, even as overnight rates have drifted lower,” Draghi said.
Anyhow, these statements are just the ECB’s observation and not really forward guidance. But they do seem to reinforce the idea that the ECB is comfortable with current rates and that interest rates aren’t gonna be rising anytime soon.
Risk aversion in Europe
The risk-on vibes from the earlier Asian session initially carried over into the European session since the major European equity indices had a firm start.
However, it soon became clear that risk sentiment was switching to risk-off in Europe since the the major European equity indices began giving back their early gains, with most already in the red by the end of the morning London session.
And according to market analysts, the early risk-on vibes was due to demand for energy and mining shares because of the recent commodities rally, which allowed the major European equity indices to sail through the disappointing earnings reports today.
However, commodities got sunk during the course of the session, and that apparently removed support for mining and energy shares as well.
- The pan-European FTSEurofirst 300 was down by 0.08% 1,558.35
- Germany’s DAX was down by 0.09% to 13,457.50
- The blue-chip Euro Stoxx 50 was down by 0.23% to 3,675.50
The risk-off vibes also weighed on U.S. equity futures.
- S&P 500 futures were down by 0.04% to 2,587.75
- Nasdaq futures were down by 0.09% to 6,307.88
Commodities got a good beating during today’s morning London, likely because the U.S. dollar was well in the green for the day.
After all, a stronger Greenback means that globally-traded commodities that are priced in U.S. dollars become relatively more expensive, especially for those who are holding other currencies.
In fact, the Greenback extended its gains against most of its rivals during the morning London session. The buck got edged out by the yen and had a harder time against the Swissy, though, likely because of the returning risk-off vibes in Europe.
Even so, the U.S. dollar index was up by 0.40% to 95.00 for the day when the morning London session.
Precious metals had a tough time, despite the risk-off vibes.
- Gold was down by 0.31% to $1,277.59 per troy ounce
- Silver was down by 1.07% to $17.051 per troy ounce
Oil benchmarks were sinking.
- U.S. WTI crude oil was down by 0.09% to $57.30 per barrel
- Brent crude oil was down by 0.25% to $64.02 per barrel
Base metals got hammered down.
- Copper was down by 0.97% to $3.127 per pound
- Nickel was down by 0.73% to $12,852.50 per dry metric ton
Major Market Mover(s):
The Swissy won out against the mighty Greenback and its fellow safe-haven currency, the yen, to emerge as the one currency to rule them all during today’s morning London session.
The risk-off vibes very likely gave both the Swissy and the yen a boost. However, bond yields held onto their gains during the morning London session, which likely dampened demand for the yen and allowed the Swissy to come out on top, at least during this session.
USD/CHF was down by 4 pips (-0.04%) to 0.9985, GBP/CHF was down by 13 pips (-0.10%) to 1.3125, EUR/CHF was down by 30 pips (-0.26%) to 1.1560
The comdolls (AUD, NZD, CAD) had a bad run during the morning London session, very likely because of the broad-based slide in commodity prices.
And among the comdolls, the Aussie got hit the hardest, possibly because European traders were also pricing in the RBA’s monetary policy stance from earlier.
AUD/USD was down by 26 pips (-0.35%) to 0.7651, AUD/JPY was down by 26 pips (-0.30%) to 87.35, AUD/CHF was down by 23 pips (-0.31%) to 0.7646
NZD/USD was down by 9 pips (-0.13%) to 0.6915, NZD/CHF was down by 13 pips (-0.20%) to 0.6912, NZD/JPY was down by 7 pips (-0.09%) to 78.95
USD/CAD was up by 42 pips (+0.33%) to 1.2760, GBP/CAD was up by 29 pips (+0.18%) to 1.6757, NZD/CAD was up by 17 pips (+0.20%) to 0.8825
Watch Out For:
- 3:00 pm GMT: U.S. JOLTS job openings (5.98M expected, 6.08M previous)
- 3:00 pm GMT: IBD/TIPP U.S. consumer confidence (51.2 expected, 50.3 previous)
- 5:35 pm GMT: U.S. Fed Governor Randal Quarles will speak
- 5:55 pm GMT: BOC Boss-Man Stephen Poloz will speak
- 7:30 pm GMT: Outgoing Fed Head Janet Yellen will speak
- 8:00 pm GMT: U.S. consumer credit ($17.5B expected, $13.1B previous)
- Dairy auction currently underway (-1.0% previous); auction usually ends at around 2:00 pm GMT