London Session Forex Recap – Nov. 11, 2015

  • German wholesale price index y/y: -1.6% vs. 0.0% expected, -1.8% previous
  • German wholesale price index m/m: -0.4% vs. 0.2% expected, -0.6% previous
  • UK jobless rate: 5.3% vs. 5.4% expected, 5.4% previous
  • UK average earnings: 3.0% vs. 3.2% expected, 3.0% previous
  • UK claimant count change: 3.3K vs. 2.7K expected, 0.5K previous
  • UK claimant count rate: 2.3% as expected, same as previous
  • Canada on Remembrance Day holiday
  • US will observe Veterans Day today

Volatility dried up during Wednesday’s morning London forex session, probably because many European forex traders were away for Armistice Day. However, there was enough price action to keep the session interesting.

Major Events:

Armistice day in Europe – Many European forex traders were probably away to commemorate Armistice day since volatility got sapped during the European trading session.

Risk appetite returns! – After several session of risk aversion, risk appetite finally made a comeback, with the pan-European FTSEurofirst 300 up by a solid 1.04% to 1,499.87 while the DAX was up by 1.33% to 10,976.50 during the forex session. Even US equity futures were basking in the risk-on environment, with the S&P 500 futures up by 0.32% to 2,084.75 and NASDAQ futures up by 0.26% to 4,655.00 during the forex session.

UK October jobs report – The labor market indicators for the UK were actually mixed, with the jobless rate ticking lower to 5.3% from 5.4% and the employment rate ticking higher to 73.7% from 73.6%, which is the highest ever on record since records began in 1971.

On the flip side, average earnings only grew by 3.0%, which is a bit lower than the expected 3.2%. Also, claimant count change registered 3.3K people seeking unemployment benefits, which is a larger number than the expected 2.7K. On a more upbeat note, the previous reading for claimant count change was significantly lowered from 4.6K to 0.5K.

Steel output in China dropped – According to a report from Bloomberg, crude steel output dropped by 3.1% to 66.12M metric tons on a monthly basis and by 1.4% year-on-year. The slowdown in output was attributed to Chinese mills battling “lower domestic demand, slumping prices and rising industry losses.”

This is very bad news for iron ore exporting countries like Australia since Chinese steel mills account for around half of global output, so a slowdown in China’s steel output would definitely put a dent on global demand for iron ores.

Major Currency Movers:

AUD – Most Aussie pairs began feeling some bearish pressure shortly after the report came out that China’s steel output dropped. Forex traders were probably pricing-in the lower demand for Australian iron ores, and not even the prevailing risk-on sentiment was enough to stoke demand for the high-yielding Aussie to at least fight of the low-yielding safe-haven currencies.

AUD/USD was down by 14 pips (-0.20%) to 0.7049, AUD/JPY was down by 10 pips (-0.11%) to 86.75, AUD/CAD was down by 9 pips (-0.10%) to 0.9352

EUR & CHF – Euro and Swissy pairs started the forex session on a somewhat strong footing but quickly gave back their gains and weakened broadly. There weren’t any direct catalysts that could account for their weakness, but it was most likely due to the risk-on sentiment and capital flows from the safe-haven Swissy and the low-yielding euro to riskier assets, namely European equities. Although I wouldn’t discount the possibility that the Swiss National Bank was sneakily weakening the Swissy again.

EUR/USD was down by 31 pips (-0.29%) to 1.0716, EUR/CAD was down by 26 pips (-0.18%) to 1.4220, EUR/GBP was down by 26 pips (-0.37%) to 0.7060

USD/CHF was up by 27 pips (+0.27%) to 1.0062, NZD/CHF was up by 15 pips (+0.23%) to 0.6600, CAD/CHF was up by 14 pips (+0.19%) to 0.7586

GBP – Despite the mixed readings for UK employment indicators, forex traders were probably looking at the long-term trends and/or they probably figured that the overall picture was a positive one for the UK since pound pairs began moving ever higher after the UK jobs report came out.

Well, Forex Gump did mention in his 4 Things to Remember When Trading the U.K. Jobs Report that forex traders tend to focus on the jobless rate, and that particular indicator printed a better-than-expected reading. Also, the risk-on sentiment probably gave the high-yielding pound a little boost.

GBP/USD was up by 11 pips (+0.07%) to 1.5177, GBP/JPY was up by 38 pips (+0.21%) to 186.84, GBP/CAD was up by 24 pips (+0.12%) to 2.0126

Watch Out For:

  • ECB President Mario Draghi is slated to speak at the BOE’s Open Forum at 1:15 pm GMT
  • Business New Zealand’s manufacturing index (55.4 previous) at 9:30 pm GMT
  • New Zealand’s food price index (-0.5% previous) at 9:45 pm GMT

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!