London Session Forex Recap – Nov. 6, 2015

  • German industrial production m/m: -1.1% vs. 0.5% expected, -0.6% previous
  • German industrial production y/y: 0.2% vs. 1.3% expected, 2.7% previous
  • French trade balance: -€3.38B vs. -€3.05B expected, -€2.98B previous
  • UK trade balance: -£2.08B vs. -£3.00B expected, -£3.85B previous
  • UK industrial production m/m: -0.2% vs. -0.1% expected, 0.9% previous
  • UK industrial production y/y: 1.1% vs. 1.3% expected, 1.8% previous
  • UK manufacturing production m/m: 0.8% vs. 0.6% expected, 0.4% previous
  • UK manufacturing production y/y: -0.6% vs. -0.7% expected, -0.9% previous
  • Today is NFP Friday!
  • Canada’s jobs report also on tap

All was calm in the forex front, as forex traders braced themselves for another NFP Friday. It wasn’t a complete lull, however, since the Loonie and the pound were apparently in play.

Major Events:

Risk aversion returns – Risk sentiment has been flip-flopping throughout the week, but today’s morning London forex session was a risk-off one, with the pan-European FTSEurofirst 300 down by 0.61% to 1,485.93 while the Euro Stoxx 50 was down by 0.48% to 3,431.00 during the forex session.

Poor German industrial productionIndustrial production in Germany contracted by 1.1% month-on-month when it was expected to expand by 0.5%. On a more slightly upbeat note, the previous reading was upgraded from -1.2% to only -0.6, but this still marks the second consecutive month of contracting industrial production, which is a bad sign for the euro zone’s main economic powerhouse.

Disappointing UK industrial productionIndustrial production in the UK was expected to contract by 0.1%, but the actual reading was a real disappointment since it posted a 0.2% contraction. According to the report, the contraction was mainly due to the 4.9% contraction in the “mining & quarrying” sector and the 6.3% contraction in the “oil & gas extraction” sector.

On a happier note, the manufacturing sector, which accounts for 69.1% of total production, grew by 0.8% month-on-month. But on a sadder note, manufacturing production contracted by 0.6% on a yearly basis, and forex traders probably had their sights on the latter reading.

NFP Friday! – Volatility usually gets sapped ahead of the NFP report, and today was no exception. But there were a few violators of the peace, as stated earlier and noted below.

Major Currency Movers:

GBP – After ranging during the Asian trading session, the pound got another round of pounding from forex traders when the London session rolled-in. The pounding then noticeably intensified when the UK reported its rather disappointing industrial production readings, which I already discussed earlier.

GBP/USD was down by 63 pips (-0.41%) to 1.5132, GBP/JPY was down by 70 pips (-0.38%) to 184.51, GBP/CHF was down by 56 pips (-0.37%) to 1.5069

CADOil prices were surging during the forex session, with Brent crude oil up by 0.88% to $48.40 per barrel. But that didn’t help pump up demand for the Loonie at all. There weren’t any catalysts to explain the weakness, so it was most likely due to preemptive positioning ahead of Canada’s jobs report for later, especially since the employment index for the Ivey PMI printed a sudden drop to 48.3 (57.1 previous), which could mean that Canada’s jobs report may print a potentially worse-than-expected reading.

USD/CAD was up by 28 pips (+0.21%) to 1.3196, AUD/CAD was up by 27 pips (+0.31%) to 0.8717, EUR/CAD was up by 40 pips (+0.28%) to 1.4358

EUR – Most euro pairs started the forex session on a weak footing, thanks to the disappointing readings for German industrial production. I say “most euro pairs” because EUR/GBP was clearly an exception given that the pair just kept climbing higher and higher non-stop. EUR/GBP was up by 34 pips (+0.49%) to 0.7189 last I checked, making it the best performing euro pair during the session.

Anyhow, the other euro pairs later got a boost as well, thanks to the return of risk aversion, which probably convinced some market players to liquidate their positions in higher-yielding assets (such as European equities) in favor of the lower-yielding euro.

EUR/USD was up by 5 pips (+0.05%) to 1.0878 with 1.0862 as session low, EUR/JPY was up by 12 pips (+0.10%) to 132.64 with 132.41 as session low, EUR/CHF was up by 14 pips (+0.13%) to 1.0834 with 1.0810 as session low

Watch Out For:

See also:

Asia Session Recap

U.S. Session Recap

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