London Session Forex Recap – September 18, 2015

  • Euro Zone Current Account: €22.6B actual v.s. €21.3B expected, €24.9B previous
  • Canadian inflation data on tap

With a practically empty forex calendar for today’s morning London trading session, forex traders turned to market sentiment and the previous events for direction instead.

European equities were seeing red, with the DAX down by 2.52% to 9,971.30 and the FTSE 100 down by 1.44% to 6,098.00 during the forex session, as European market participants digested the implications of the Fed’s decision to keep rates on hold yesterday due to concerns over weakening global growth.  As a result of the risk aversion, demand for the euro and the high-yielding pound dropped like a rock, except against the Greenback, of course.

GBP/USD is up by 68 pips (+0.44%) to 1.5638, GBP/NZD is down by 128 pips (-0.53%) to 2.4253, GBP/CAD 103 pips (-0.50%) to 2.0383

EUR/USD is up by 32 pips (+0.29%) to 1.1429, EUR/CAD is down by 94 pips (-0.63%) to 1.4885, EUR/AUD is down by 56 pips (-0.35%) to 1.5713

The risk appetite also caused demand for the safe-haven yen and Swissy to pick up. And between the two, the Swissy was clearly the currency of choice for most European forex traders to flee to since CHF/JPY is up by 39 pips (+0.31%) to 124.92 .

EUR/CHF is down by 46 pips (-0.43%) to 1.0907, GBP/CHF is down by 32 pips (-0.21%) to 1.4930

EUR/JPY is down by 15 pips (-0.10%) to 136.26, GBP/JPY is down by 11 pips (-0.05%) to 186.20

As to why forex traders chose the Swissy over the yen, it’s probably because the Swiss National Bank (SNB) revealed in yesterday’s monetary policy statement that “SNB expects economic activity to pick up gradually in the second half of the year.” The Bank of Japan (BOJ), meanwhile, reported in their meeting minutes that the “quantitative and qualitative monetary easing (QQE) had been exerting its intended effects,” which sounds nice and all, but there were reports released during the forex session about plans to expand or overhaul the QQE program in light of recent global market developments and the Fed’s more dovish tone.

The risk aversion also caused commodities to slide lower, with Brent crude oil down by 1.26% to $48.46 per barrel during the session. But strangely enough, the comdolls were mostly strong, especially the Kiwi and the Loonie. Although in the case of the Loonie it’s quite possible that some forex traders were opening pre-emptive positions since they were optimistic on Canada’s inflation data for later.

NZD/USD is up by 57 pips (+0.89%) to 0.6442, NZD/JPY is up by 39 pips (+0.50%) to 76.77

CAD/CHF is up by 20 pips (+0.28%) to 0.7333, AUD/CAD is down by 29 pips (-0.32%) to 0.9467

Moving along, European forex traders showed just how dismayed they were with the Fed’s decision by selling the greenback across the board. In fact, the U.S. dollar was practically being used as a doormat by all of its forex rivals during the session, and later prospects for the Greenback don’t look too good since U.S. equity futures are currently down during the session, with the S&P 500 Futures down by 0.89% to 1,959.75 and NASDAQ futures down by 1.00% to 4,326.50.

USD/CHF is down by 64 pips (-0.67%) to 0.9545, USD/JPY is down by 42 pips (-0.35%) to 119.25, USD/CAD is down by 117 pips (-0.89%) to 1.3023

The forex calendar for the upcoming afternoon London/morning U.S. session only has the headline (0.0% expected, 0.1% previous) and core (0.2% expected, 0.0% previous) readings for Canadian CPI on tap as the only potential market movers.

These inflation readings are scheduled for release at around 1:30 pm GMT, and do note that the headline reading is expected to decrease while the core reading is expected to increase, so we may see some interesting price action from the Loonie. And if you haven’t already, go check out Forex Gump’s Forex Trading Guide for this event.

We also have the U.S. CB leading index (0.2% expected, -0.2% previous), which is a composite of previously released economic data, scheduled for release at 3:00 pm GMT. It’s expected to increase, but it’s usually considered a low-tier item, so it may not move the markets much if at all given the bearish sentiment on the Greenback. Stay frosty and have a good weekend!

See also:

Asia Session Recap

U.S. Session Recap

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