20 July 2016 at 10:51 GMT
Today's session has been marked by both central bank action and anticipation of further such action, as markets react to positive UK jobs data (and the release of a fairly positive Bank of England report) and await tomorrow's European Central Bank statement and press conference.
The US earnings season remains in full swing with big names such as Intel, Morgan Stanley and others due to report today. Core bonds, meanwhile, are lower, as is iron ore on oversupply concerns.
- EZ Euro Zone July Adv. Consumer Confidence (-8.0 exp., 1400 GMT)
- US Weekly DOE Crude Oil Inventories (1430 GMT)
USD firmer on the day helped by two-year US Treasury yields trading firmly recently on the expectations of Federal reserve action in August. EURUSD traded below 1.1000 earlier today and USDJPY advanced higher towards 106.60 since the European open.
Following the release of UK jobs data, Cable advanced higher after a break of 1.3100 and reached 1.3196 today while EURGBP rate gave up all of yesterday’s gains and traded down at 0.8350 as of this writing. All focus is on tomorrow's ECB decision and ECB head Draghi's press conference.
FX Options volatilities
EURUSD curve higher today with the three-month tenor up 0,4. The focus is on the ECB tomorrow with o/n trading around 80-90 pips for an ATM straddle. USDJPY 1-week and less mainly seller to finance long gamma position over the Bank of Japan.
Overall ATM curve is unchanged while risk reversal slowly become less bid for JPY calls.
GBPUSD strike today 1.31 (1.4 billion) and 1,32 (1.2bn) and with the move after numbers, we now attend 1.32 which also could be a magnet until exercise.
A turnaround in sentiment and weak auction results sent German government bonds lower again following a relatively tight trading range in recent sessions.
Corporate bond spreads are enjoying the tailwind as well, although spreads are only marginally tighter in basis point terms.
With most of the developed market still in low-yield mode, investors will soon be looking for alternatives. One of the regions in focus could be the Gulf countries, where a double-digit billion inaugural bond issuance from Saudi Arabia could be launched at any time and mark the final breakthrough for the region.
Shares in Europe traded higher this morning, recovering the losses of the previous session.
In Germany, SAP rose 2.8% after reporting a profit that beat estimates while in Scandinavia, Nordea outperformed analyst expectations on profits and rose 1%.
The raw materials sector weighed on markets; Anglo American fell 3.1% after announcing a cut to its copper production target while BHP Biliton fell 2.9% overnight in Australia having announced a cut of 7% in iron ore production.
S&P500 index futures were broadly unchanged from last night’s close with earnings due to be released from American Express, Ebay, Intel, and Morgan Stanley later today.
The replay of our Morning Call can be found here.
Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.
Blue skies again? Solid jobs data and a report from the BoE this morning stirred sterling to life, but the overall trend will likely remain bearish. Photo: iStock
— Edited by Michael McKenna