London Session Forex Recap – Oct. 21, 2015

  • U.K. Public Sector Net Borrowing: £8.6B actual v.s. £9.1B expected, £10.8B previous
  • BOC rate decision and press conference coming up

Today’s morning London forex session was somewhat subdued, with some currencies imprisoned in relatively tight ranges while others had choppy forex price action. The only clear movers were the Kiwi and the Swissy.

The Kiwi was clawing its way higher across the board during the forex session after dropping like a rock when yesterday’s dairy auction yielded a 3.1% fall in the Global Dairy Trade index. There weren’t any catalysts during the forex session, but it’s possible that European forex traders were pricing-in the jump in visitor arrivals (4.2% current, 0.5% previous), which is a real boon to New Zealand’s growing tourism industry. It’s also possible that market sentiment was in play since risk appetite made a comeback, with the DAX up by 0.81% to 10,228.80 during the London forex session, which could have helped to pump-up demand for the high-yielding Kiwi.

NZD/USD is up by 27 pips (+0.42%) to 0.6729, NZD/JPY is up by 44 pips (+0.55%) to 80.76, NZD/CAD is up by 36 pips (+0.42%) to 0.8756

The Swissy, meanwhile, was surprisingly weak despite a lack of reports. My forex-sense is tingling, and it’s telling me that the Swiss National Bank was sneakily weakening the Swissy again. Although, I could be wrong since it’s possible that some investors were just running away from Switzerland due to the recent news that Switzerland-based Credit Suisse just reported a CHF 125M loss instead of a CHF 308M proifit, forcing the bank to announce a fundraiser and implement a management overhaul.

USD/CHF is up by 23 pips (+0.24%) to 0.9581, NZD/CHF is up by 43 pips (+0.67%) to 0.6448, EUR/CHF is up by 35 pips (+0.33%) to 1.0883

As for other currencies of note, we have the Aussie. The Aussie dropped pretty hard across the board during the German open. It then traded sideways for the rest of the session. There weren’t any catalysts that could explain the initial drop, but it’s possible that European forex traders were taking into consideration the 0.4% slide in the CB leading index. Although it’s also possible that forex traders were pricing-in the 3.06% drop in the Shanghai Composite Index. The returning risk-on sentiment during the European session then probably mustered enough Aussie bulls to stop the drop and keep the Aussie supported for the rest of the forex session.

AUD/USD is down by 26 pips (-0.37%) to 0.7228, AUD/CAD is down by 16 pips (-0.17%) to 0.9396, AUD/NZD is down by 36 pips (-0.34%) to 1.0737

As for the pound, it was mixed but mostly up, probably because of the better-than-expected reading for U.K. public sector net borrowing, which means that the budget deficit isn’t that big anymore. In fact, some analysts point out that the U.K. now apparently has the smallest budget deficit ever since 2007, which helps to explain why most pound pairs were trading higher.

GBP/USD is up by 23 pips (+0.16%) to 1.5451, GBP/JPY is up by 56 pips (+0.31%) to 185.43, GBP/CHF is up by 44 pips (+0.31%) to 1.4788

The forex calendar for the upcoming afternoon London/morning U.S. session has top-tier events for the Loonie on tap, so y’all better get your game face on.

The fun will begin (or not) at 3:00 pm GMT when the Bank of Canada (BOC) presents its rate statement together with its quarterly Monetary Policy Report.

Do note that most forex traders and market analysts are expecting the BOC to keep the overnight rate on hold at 0.50%, so if no surprises are forthcoming, then forex traders would probably look to the central bank’s overall sentiment for guidance on the Loonie’s direction.

As for the monetary policy report, forex traders will probably be scanning the report for clues on the BOC’s economic outlook with regard to growth and inflation. You can grab a copy here when it finally comes out.

Next, at 3:30 pm GMT, we’ll get the report on Uncle Sam’s crude oil inventories (3.5M expected, 7.6M previous). Do note that it’s expected to decline, which could mean either increased demand or lower levels of oil production. This report usually affects the Loonie’s forex price action, though, since Canada exports most of its oil to its southern neighbor.

After that, at 4:15 pm GMT, the BOC will hold a press conference, so make sure to tune-in on what the BOC officials have to say. You can watch a webcast of the event here.

Forex traders will then treated to a central banker speaker bonus round, starting with BOE Guv’nah Mark Carney’s speech in Oxford at around 6:00 pm GMT. Shortly after that, at 6:30 pm GMT, Federal Reserve Governor Jerome Powell will be delivering a speech in New York.

You know the drill, guys: make sure to keep an ear out for any juicy updates with regard to the future direction of monetary policy and/or shifts in economic outlook for their respective economies. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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