London Session Forex Recap – Oct. 7, 2015

  • German Industrial Production m/m: -1.2% actual v.s. 0.2% expected, 1.2% previous
  • French Trade Balance: -€2.98B actual v.s. -€3.25B expected, -€3.16B previous
  • Swiss Foreign Currency Reserves: CHF 532B actual v.s. CHF 540B previous
  • U.K. Industrial Production m/m: 1.0% actual v.s. 0.3% expeted, -0.3% previous
  • U.K. Manufacturing Production m/m: 0.5% actual v.s. 0.3% expected, -0.7% previous

After a rather volatile Asian trading session, tranquility returned when the morning London forex session came around. It was so tranquil that the pound was the only clear mover, although risk appetite later came into play as well since most of the higher-yielders were able to win out against the safe-havens near the end.

Okay, let’s start with the pound. Most pound pairs were charging higher on the back of British equities, with the FTSE 100 up by 0.60% to 6,366.250 during the forex session, which also happens to be a six-week high.

One particular piece of news that pumped demand for both British equities and the pound was the continuing SABMiller takeover story.

As I mentioned in yesterday’s London session recap, Anheuser-Busch InBev has been trying to take over British brewing giant SABMiller. Anheuser-Busch InBev has already made previous offers at £38 per share and then £40 per share. But today, Anheuser-Busch InBev reportedly offered £42.15 per share in cash, which is equivalent to over £68 billion. That’s a lot of pound sterlings! And forex traders were probably pricing that in. The pound also got a major boost when the readings for both industrial production and manufacturing production both showed pleasantly bettter-than-expected readings, which could potentially mean an improvement in Q3 growth.

GBP/USD is up by 57 pips (+0.39%) to 1.5310, GBP/JPY is up by 85 pips (+0.46%) to 183.83, GBP/CHF is up by 55 pips (+0.38%) to 1.4796

As I said earlier, risk appetite seems to be in play since other European equities were also in the Green, with the DAX up by 1.19% to 10,021.00 during the forex session. Even U.S. equity futures were in positive territory, with the S&P 500 futures up by 0.66% to 1,981.50 and NASDAQ futures up by 0.87% to 4,327.38. Commodities were rallying as well, with Brent crude oil up by 1.88% to $52.90 per barrel due to signs of tightening in the oil market.

As a direct consequence of higher commodity prices, the comdolls were able to win out against the safe-havens, although gains were somewhat subdued and price action wasn’t as clear-cut when compared to the pound. Also, there wasn’t a lot of demand for the Loonie despite surging oil prices, probably because European forex traders were also pricing-in yesterday’s disappointing readings for Canada’s trade deficit (-$2.5B actual, -$1.1B expected, -$0.8B previous) and Ivey PMI (53.7 actual v.s. 54.1 expected, 58.0 previous).

NZD/USD is up by 22 pips (+0.33%) to 0.6626, NZD/JPY is up by 27 pips (+0.32%) to 79.48, NZD/CAD is up by 21 pips (+0.24%) to 0.8619

AUD/USD is up by 20 pips (+0.29%) to 0.7216, AUD/JPY is up by 35 pips (+0.40%) to 86.68, AUD/CHF is up by 20 pips (+0.29%) to 0.6974

USD/CAD is down by 3 pips (-0.03%) to 1.3008, CAD/JPY is up by 11 pips (+0.13%) to 92.35, CAD/CHF is up by 5 pips (+0.08%) to 0.7429

As for the euro, it weakened shortly after Germany printed a disappointing reading for its industrial production. It then milled around for a bit before opposing currency price action took over, so the euro ended up mixed – super effective against the safe-havens but vulnerable to the higher-yielders.

EUR/USD is up by 15 pips (+0.14%) to 1.1266, EUR/JPY is up by 30 pips (+0.22%) to 135.30, EUR/AUD is down by 45 pips (-0.29%) to 1.5591

The forex calendar for the upcoming afternoon London/morning U.S. session only has a few mid-tier items on tap, so keep on eye on how risk sentiment develops during the session as well.

Up first, at 1:30 pm GMT, we’ll get the reading for Canada’s building permits (0.3% expected, -0.6% previous). Do note that the actual reading is expected to improve, which indicates an improving housing market and a healthy construction industry, so expect some demand for the Loonie if the actual reading meets or beats expectations.

Next, at 3:00 pm GMT, forex traders will get a glimpse at the National Institute of Economic and Social Research’s (NIESR) monthly GDP estimate for the United Kingdom (0.5% previous). NIESR tries to predict how the British economy will turn out ahead of the government’s own reading. It rarely moves the market, however.

Then, at 3:30 pm GMT, we’ll get to see where Uncle Sam’s crude oil inventories are currently at (2.2M expected, 4.0M previous). Please note that the actual reading is expected to show lower inventory levels, which could mean more demand for oil (or lower levels of production). This indicator usually affects the Loonie, however, since Canada is the main supplier of “black crack” to its southern neighbor.

Finally, at 8:00 pm GMT, we’ll get the reading for U.S. consumer credit ($19.5B expected, $19.1B previous). It is expected to increase a bit, which could potentially higher levels of consumer spending, so keep an eye on the Greenback. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis. Head on to Big Pippin’s Daily Chart Art for some pip-locking technical weeks!