Article / 15 July 2016 at 11:44 GMT

Mid-session Europe: Risk versus terror

Saxo Markets


Foreign exchange

The terrorist attack on Nice has not yet quashed the whole of this week's risk-on rampage, but risky assets are definitely weaker and the usual array (how disheartening to type "the usual" in connection with such grievous circumstances) of travel-related shares are lower on the day.

Stateside, the US earnings season has started on a positive note as the country heads into a key political event in the form of the Republican convention in Cleveland at which Donald Trump will, barring the unforeseen, be officially nominated as the GOP's candidate for president.

In commodities, oil remains in range while copper has posted strong gains on the week.


  • US June Adv.Retail Sales (0.1% exp., 1230 GMT)
  • US July Empire Manufacturing (5.0 exp.,1230 GMT)
  • US June CPI; CPI ex. Food and Energy (1230 GMT)
  • US June Industrial Production (+0.3 exp.,1315 GMT)
  • US July Prelim. Univ. of Michigan Confidence (93.5 exp.,1400 GMT)
  • US May Business Inventories (0.1% exp.,1400 GMT)

  • Federal Reserve’s Williams (1700 GMT)
  • Fed’s Kashkari (1715 GMT      

Forex developments

USDJPY traded above 106-00 in Asia with JPY extending its weekly decline to the largest level seen since 1999. Continued speculation over Japan’s new fiscal package details kept JPY weaker versus the FX majors. GBP enjoyed strong rally yesterday after the Bank of England kept policy rates unchanged (versus a widely expected 0.25% cut); cable tested yesterday’s highs at 1.3481 in Asia today, but retraced back to 1.3350 since Europe opened. Major data out of US expected this afternoon including June CPI and Retail Sales. 

FX Options volatilities

The two-week expiry rolls to the important Bank of Japan meeting and therefore 2w USDJPY is up 5 vols today. 

The rest of the curve is also trading higher, with 1m up 0.5 vol on back of the rally in spot we saw in Asia. EUR and GBP vols are trading on the sidelines so far today. GBP vols got marked a lot lower yesterday after the Bank of England was out of the picture. Now the next big event is the European Central Bank next Thursday. 

Fixed income


A minor reaction only (upwards) in European government bonds following the Nice attack. Former Fed chief Ben Bernanke is out advising Japan on “helicopter money”; other central banks closely watching European credit spreads which are being further squeezed amid high demand and deteriorating liquidity; valuations looking increasingly stretched.




The US earnings season has started well as good results from JPMorgan pushed the banking sector higher. Positive sentiment continued over into Asia helped by reassuring Chinese data with Tokyo up five days straight.

In Europe we are seeing a weak start with the Euro Stoxx 600 down 0.35% on lighter volume. Travel and leisure stocks are lower after the attack in Nice while the utilities and healthcare sectors are positive.

Swatch is trading down 10% after issuing a profits warning. Sales were 12% lower after struggling in the key markets of Hong Kong, France and Switzerland.

The attack in Nice has impacted the airlines and hotel groups, Easyjet is down 3.5% while Accor, the French hotel chain, is down 4%.

Infosys, a barometer for the health of the global enterprise spending market, cut its outlook revenue growth for this year. Shares in India are 9% lower and US pre market are down 10%.

The replay of our Morning Call can be found here.

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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.

Nice, France

The terror attacks in France may be a curtain call for the week's risk-on wave. Photo: iStock

— Edited by Michael McKenna

The Global Sales Trading desk is a multi-asset team providing customised trading solutions


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