London Session Forex Recap – Oct. 26, 2015

  • German IFO Current Conditions: 112.6 actual v.s. 113.5 expected, 114.0 previous
  • German IFO Expectations: 103.8 actual v.s. 102.3 expected, 103.3 previous
  • German IFO Business Climate: 108.2 actual v.s. 107.8 expected, 108.5 previous
  • U.K. BBA Mortgage Approvals: 44.49K actual v.s. 46.20K expected, 46.57K previous
  • U.K. CBI Industrial Trends: -18 actual v.s. -8.0 expected, -7.0 previous
  • New Zealand’s trade data later

Volatility got sapped during today’s morning London forex session, as the euphoria from the Chinese rate cut was slowly dampened by the returning risk aversion, with the FTSEurofirst 300 down by -0.3% t0 1,485.73. U.S. equity futures were in the red as well, with the S&P 500 futures down by 0.18% to 2,062.25 and NASDAQ futures down by 0.22% to 4,601.12. Looking at the charts, the only real movers during the forex session were the Swissy, the Kiwi, and the Loonie.

Let’s start with the Swissy. The returning risk-off sentiment failed to pump up demand for the safe-haven Swissy. There weren’t any direct catalysts during the forex session, but digging around in the Swiss National Bank’s (SNB) archive, I found an earlier press release which showed that the sight deposits of domestic Swiss banks are currently at CHF 401,209 million. That’s a significant jump from the previous week’s CHF 399,077 million, and helps to verify my hunch that the SNB was sneakily weakening the Swissy again and was also probably used by forex traders as a reason to further dump the Swissy.

To the forex newbies out there, sight deposits are one of the main tools used for the SNB’s currency purchases (i.e., market manipulation) since they are funds “which can be transferred immediately and without restriction to another account or which can be converted into cash.” Thinking about it, it’s also possible that the SNB was sneakily weakening the Swissy yet again.

USD/CHF is up by 38 pips (+0.40%) to 0.9817, EUR/CHF is up by 35 pips (+0.32%) to 1.0821, GBP/CHF is up by 74 pips (+0.50%) to 1.5059

Moving on, another weak currency during the forex session was the Kiwi. There weren’t any direct catalysts that could account for the Kiwi’s weakness aside from the returning risk-off sentiment, though.

Looking at the charts, most Kiwi pairs were able to ride the risk-on sentiment during the Asian trading session, so it’s possible that forex traders were just taking some profits off the table.  Although it’s also possible that some forex traders were just unwinding their positions ahead of New Zealand’s trade data for later.

NZD/USD is down by 11 pips (-0.16%) to 0.6769, EUR/NZD is up by 39 pips (+0.23%) to 1.6304, GBP/NZD is up by 71 pips (+0.32%) to 2.2668

As for the Loonie, it probably got some buyers due to a rally in oil prices, with Brent crude oil up by 25 cents to $48.24 per barrel and U.S. crude oil futures up by 24 cents to $44.84 per barrel during the forex session.

USD/CAD is down by 21 pips (-0.16%) to 1.3137, AUD/CAD is down by 21 pips (-0.22%) to 0.9524, NZD/CAD is down by 32 pips (-0.36%) to 0.8890

The forex calendar for the upcoming afternoon London/morning U.S. session only has two items lined up, so make sure to keep tabs on market sentiment as well.

Up first, at 3:00 pm GMT, forex traders will get the reading for U.S. new homes (546K expected, 552K previous). Do note that it’s expected to show a lower figure when compared to last time, so expect some Greenback weakness, especially if the actual reading comes out as worse-than-expected.

After that at 10:45 pm GMT, we’ll get a look at New Zealand’s trade balance (-822M expected, -1035M previous). New Zealand’s trade deficit is expected to contract a bit, which could be good news for the Kiwi, so make sure to keep an eye on it, alright? Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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