London Session Forex Recap – September 22, 2015

  • Swiss Trade Balance: CHF 2.87B actual v.s. CHF 2.75B expected, CHF 3.58B previous
  • U.K. Public Sector Net Borrowing £12.1B actual v.s. £9.2B expected, £0.7B previous
  • U.K. CBI Industrial Trends: -7 actual v.s. 0 expected, -1 previous

Risk aversion was running rampant during the morning London forex session, with the DAX down by 2.58% to 9,691.50 and the FTSE 100 down by 1.92% to 5,991.50. U.S. equity futures were also hinting that risk aversion will spill over into the U.S. session since the S&P 500 Futures was down by 1.43% to 1,935.00 while NASDAQ futures were down by 1.84% to 4,261.38 during the forex session.

Given the intense risk-off sentiment, forex traders were fleeing en masse to the safe-haven currencies while leaving most of the higher-yielding currencies to twist in the wind.

The Greenback naturally had a lot of buyers due to Atlanta Fed President Dennis Lockhart’s hawkish speech from yesterday, wherein he stated that a rate hike “later this year” is still on the table. But the king (or queen) of pips was not the Greenback – it was the yen. There were no catalysts that could have induced forex traders to flee to the yen, though, so perhaps forex traders have gotten over their disappointment with the Bank of Japans’s dovish outlook.

USD/JPY is down by 49 pips (-0.41%) to 119.85, AUD/JPY is down by 96 pips (-1.12%) to 85.09, NZD/JPY is down by 55 pips (-0.72%) to 75.58

As for the safe-haven Swissy, it had some buyers too, but its performance wasn’t as clear-cut as the Greenback’s or the yen’s, probably because Switzerland’s trade surplus declined in August, which is not exactly in line with the Swiss National Bank’s projections that exports would “make a greater contribution to economic growth” in the second half of the year. Of course, there’s always the possibility that the SNB is sneakily trying (and failing) to weaken the Swissy again.

USD/CHF is up by 5 pips (+0.06%) to 0.9734, AUD/CHF is down by 51 pips (-0.73%) to 0.6905, GBP/CHF is down by 53 pips (-0.34%) to 1.5024

It goes without saying that all the higher-yielding comdolls were getting a severe beating during the forex session, especially from the safe-havens, but one currency stood head and shoulders above them all – the Aussie. Well, I guess the word “above” isn’t exactly appropriate here since the Aussie was essentially being used as a doormat by all of its forex rivals.

The broad Aussie weakness could have been due to profit-taking after Australia’s better-than-expected HPI from earlier, but I highly doubt it given the sheer intensity of the Aussie’s weakness.

Looking through the news reports that came out during the forex session, there were a lot of reports of an IMF research paper which claimed that Australia will be the “worst-hit” advanced economy on the planet from a Chinese slowdown. Perhaps forex traders got rattled after reading that nasty (only if you’re bullish on the Aussie) piece of work.

AUD/USD is down by 57 pips (-0.80%) to 0.7093, AUD/NZD is down by 54 pips (-0.48%) to 1.1247, AUD/CAD is down by 54 pips (-0.57%) to 0.9405

The high-yielding pound couldn’t get a break either, thanks to the prevailing risk-off sentiment, the FTSE 100’s poor performance, and a couple of disappointing data points. The worse-than-expected reading for public net sector borrowing, in particular, marks the highest ever budget deficit since August 2012. Blimey!

GBP/USD is down by 57 pips (-0.37%) to 1.5438, GBP/JPY is down by 135 pips (-0.72%) to 185.16, GBP/CAD is down by 41 pips (-0.20%) to 2.0457

As for the euro, well, there wasn’t really anything worth writing home about since there weren’t any major reports released during the forex session, which is probably why the euro was being led around by opposing currency price action.

Moving on, the forex calendar for the upcoming afternoon London/morning U.S. session is gonna be a bit on the light side again, so perhaps risk sentiment would be in play once more.

Up first, at 2:00 pm GMT, we’ll get Uncle Sam’s house price index (0.4% expected, 0.2% previous). Do note that it is expected to improve, so we may see further Greenbck strength should the actual reading comes in within expectations or better.

After that, at 3:00 pm GMT, we’ll get the euro zone’s flash consumer sentiment (-7.0 expected, -6.9 previous) and the Federal Reserva Bank of Richmond’s manufacturing index (4 expected, 0 previous). They’re both considered low-tier items, so they’re not expected to move the markets much, but do note that the former is expected to worsen while the latter is expected to improve.

Finally, at 7:00 pm GMT, we’ll get a central banker bonus round as BOE Deputy Governor Nemat Shafik speaks in Edinburgh. You know the drill, guys: keep an ear out for any shifts in sentiment, updates on the BOE’s economic outlook, and/or juicy hints on the future direction of monetary policy. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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