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Today’s morning London session was rather busy, with lots of themes playing out. However, the most noteworthy (and wonky) theme is NZD strength despite the risk-off vibes.

Another major theme (that made more sense) is CAD weakness, apparently because of the slide in oil prices.

Yet another theme is GBP’s slide in the wake of the latest U.K. jobs report that revealed rather disappointing wage growth.

  • French final HICP m/m: unchanged at +0.1% as expected
  • French final HICP y/y: unchanged at +1.2% as expected
  • U.K. jobless rate: steady at 4.3% as expected
  • U.K. average earning (3m y/y): 2.2% vs. 2.1% expected, 2.3% previous
  • Claimant count change in the U.K.: 1.1K vs. 2.9K expected, 2.6K previous
  • Euro Zone trade balance: €25.0B vs. €21.2B expected, €21.0B previous
  • U.S. CPI and retail sales reports coming up; read Forex Gump’s preview

Major Events/Reports

U.K. jobs report

The Office for National Statistics (ONS) released the U.K.’s latest jobs report earlier.

And as expected, the jobless rate for the three months to September was unchanged at 4.3%, which happens to be the shared lowest reading on record since comparable records began in 1971.

Also, the number of people who claimed unemployment benefits increased only by 1.1K in October, which is much less than the expected 2.9K increase. But on a more downbeat note, the estimated number of claimants back in September was increased from 1.7K to 2.6K.

Moving on to wage growth, total average weekly earnings increased by 2.6% year-on-year in September, picking up thepace from August’s 2.4%. This brings the three-month average to 2.2%, beating expectations for a 2.1% increase.

That’s pretty good, right? Well, on the surface at least since a closer look shows that wage growth accelerated in September because total bonuses surged by a whopping 16.5% (+5.4% previous). And that’s not good since stronger wage growth driven by higher bonuses ain’t exactly sustainable.

Anyhow, if bonuses are stripped to get regular pay, then average weekly earnings only grew by 2.2%, which is a tick slower compared to the previous month’s 2.3%.

It gets even worse if we take inflation into account because real earnings (excluding bonuses) actually fell by 0.6% in September, which marks the eight consecutive month of negative wage growth, as well as the hardest decline in wage growth in five months.

Commodities fall, but precious metals shine

Commodities were broadly in decline during the morning London session. However, not all commodities were in negative territory since precious metals were doing just fine and dandy.

Interestingly enough, the Greenback was actually a net loser for the day (so far). And for reference, the U.S. dollar index was down by 0.29% to 93.45 for the day when the morning London session ended. However, the Greenback’s weakness didn’t seem to stoke demand for most commodities.

And according to market analysts, signs of a cooling Chinese economy dampened demand for commodities, especially base metals.

Other than that, market analysts also blamed the slide in oil prices, in particular, on lingering disappointment over the IEA’s downbeat outlook for the oil market.

Most base metals were down hard.

  • Copper was down by 0.69% to $3.044 per pound
  • Zinc was down by 1.68% to $3,105.00 per dry metric ton

Oil benchmarks really felt the pain.

  • U.S. WTI crude oil was down by 0.12% to $56.81 per barrel
  • Brent crude oil was down by 0.13% to $63.60 per barrel

Precious metals, meanwhile, actually got bid higher.

  • Gold was up by 0.22% to $1,285.73 per troy ounce
  • Silver was up by 0.29% to $17.123 per troy ounce

Another risk-off day in Europe

The risk aversion that has gripped European markets since last week just won’t go away, so the major European equityn indices got another good thrashing.

And today’s round of risk aversion was blamed by market analysts mainly on the broad-based commodities retreat, which weighed on mining and energy companies, souring overall risk sentiment in the process.

  • The pan-European FTSEurofirst 300 was down by 0.90% 1,496.42
  • Germany’s DAX was down by 1.31% to 12,862.25
  • The blue-chip Euro Stoxx 50 was down by 0.84% to 3,526.50

The risk-off vibes in Europe also kicked U.S. equity futures lower.

  • S&P 500 futures were down by 0.53% to 2,564.25
  • Nasdaq futures were down by 0.52% to 6,260.38

Global bond yields crushed

The intense risk-off vibes in Europe also apparently spurred safe-haven demand for bonds, causing global bond yields to plummet.

  • German 10-year bond yield down by 8.82% to 0.362%
  • French 10-year bond yield down by 3.96% to 0.719%
  • U.K. 10-year bond yield down by 3.26% to 1.278%
  • U.S. 10-year bond yield down by 1.73% to 2.340%
  • Canadian 10-year bond yield down by 1.90% to 1.914%

Major Market Mover(s):

NZD

The higher-yielding Kiwi was the best-performing currency of the morning London session. That’s right! The Kiwi was able to beat the safe-havens yen and Swissy despite the risk-off vibes and plunging global bond yields. You can check your own charts if you don’t believe me.

There were no apparent catalyst, but it’s possible that the plunge in global bond yields during the past few days finally gave the higher-yielding Kiwi a yield advantage. Another possible reason is just plain and simple short-covering by Kiwi shorts. After all, the Kiwi has been falling against most of its peers for the past four trading days already.

NZD/USD was up by 23 pips (+0.35%) to 0.6901, NZD/CHF was up by 21 pips (+0.30%) to 0.6804, NZD/JPY was up by 12 pips (+0.14%) to 77.82

CAD

The Loonie was THE weakest currency of the morning London session. Heck the pound, which was the second worst-performing currency, had a decent lead against the Loonie, given that GBP/CAD was up by 41 pips (+0.25%) to 1.6796 for the session. In fact, the Loonie is currently on track to being the worst-performing currency of the day as well.

As to why the Loonie was super weak, well, that was apparently because the Loonie was tracking oil prices lower.

USD/CAD was up by 36 pips (+0.28%) to 1.2765, AUD/CAD was up by 39 pips (+0.41%) to 0.9683, NZD/CAD was up by 55 pips (+0.63%) to 0.8803

 

GBP

The pound had a mixed start. It then jumped higher across the board when the U.K.’s latest jobs report was released, likely because the jobs report looked good on the surface.

However, the details of the jobs report were not impressive, especially the details on wage growth. And forex traders were apparently more concerned with wage growth, given it’s more direct link to inflation and consumer spending, since the would-be pound rally very quickly lost steam, turned around, and then became a pound rout.

GBP/NZD was down by 98 pips (-0.37%) to 1.9078, GBP/AUD was down by 26 pips (-0.15%) to 1.7346, GBP/JPY was down by 33 pips (-0.23%) to 148.47

Watch Out For:

  • 1:30 pm GMT: Headline (0.1% expected, 0.5% previous) and core (0.2% expected, 0.1% previous) U.S. CPI
  • 1:30 pm GMT: Headline (0.0% expected, 1.6% previous) and core (0.2% expected, 1.0% previous) U.S. retail sales
  • 1:30 pm GMT: U.S. Empire state manufacturing index (25.5 expected, 30.2 previous)
  • 2:30 pm GMT: CB’s U.K. leading index (-0.1% previous)
  • 3:00 pm GMT: U.S. business inventories (0.0% expected, 0.7% previous)
  • 3:30 pm GMT: U.S. crude oil inventories (-2.1M expected, 2.2M previous)