London Session Forex Recap – Nov. 16, 2015

  • Euro Zone final CPI m/m: 0.1% as expected vs. 0.2% previous
  • Euro Zone final CPI y/y: 0.1% vs. 0.0% expected, 0.0% previous
  • Euro Zone final core CPI y/y: 1.1% vs. 1.0% expected, 1.0% previous

Today’s morning London forex session was pretty active, with the Kiwi and the Japanese yen in focus. Wanna know what could have moved them?

Major Events:

Risk appetite appears – Risk appetite decided to show up during the European session, with the pan-European FTSEurofirst 300 up by a respectable 0.32% to 1,462.58 during the forex session. US equity futures were also in the green, with the S&P 500 futures up by 0.215 to 2,022.75 and NASDAQ futures up by 0.18% to 4,510.25 during the forex session.

Some market analysts attributed the prevailing risk-on sentiment to the perception that the horrible Paris attacks only had a limited impact on the markets. Understandably, travel-related stocks were still down in the dumps, however.

Final estimates for Euro Zone CPI – The final estimate for annualized headline CPI in the euro zone was revised higher to 0.1% from 0.0% previously. The core reading, meanwhile, was also revised higher from 1.0% to 1.1%. So far, so good. But it gets even better when you consider that the previous final reading for annualized headline CPI was -0.1% while the previous core reading was 0.9%.

Anyhow, the main drivers were all related to food. Vegetables, for example, had an upside contribution of 0.14% while fruits had a positive contribution of 0.07%. As for the main drags, they were all related to oil prices, with heating oil pulling CPI down by 0.22% and fuels for transport having a negative contribution of 0.68%.

Preemptive positioning ahead of dairy auction? – Fonterra is scheduled to hold another Global Dairy Trade (GDT) auction tomorrow, and many market players are apparently expecting a 3.0% drop, according to a weekend article from the New Zealand Herald. That same article also reported that the Bank of New Zealand “cut its forecast for Fonterra Cooperative Group’s payout to farmers this season amid continued weakness in international dairy prices,” which further supports another drop in the GDT price index tommorrow.

Major Currency Movers:

JPY – The yen started weakening at the very start of the forex session, as European forex traders priced-in the nasty news from the earlier session that Japan is in a recession yet again. The yen’s tumble then intensified further when it became clear that risk appetite was here to stay – forex traders were apparently abandoning the safe-haven yen for the riskier assets, namely European equities.

USD/JPY was up by 41 pips (+0.34%) to 123.04, CHF/JPY was up by 36 pips (+0.30%) to 122.33, GBP/JPY was up by 59 pips (+0.32%) to 186.99

NZD – The Kiwi got mauled when the London forex session rolled in. There weren’t any direct catalysts that could account for the sudden weakness, however, but it’s possible that forex traders were opening preemptive positions ahead of Fonterra’s Global Dairy Trade auction, as I already highlighted above.

NZD/USD was down by 55 pips (-0.85%) to 0.6484, NZD/CAD was down by 64 pips (-0.74%) to 0.8631, NZD/CHF was down by 52 pips (-0.79%) to 0.6521

EUR – Despite the upward revisions and the overall positive CPI readings for the euro zone, the euro’s price action was more of a roller coaster ride. EUR/USD, for example, started the forex session by sliding 37 pips (-0.35%)to a session low of 1.0713 before recovering to 1.0738. The initial drop was most likely due to capital flows from the low-yielding euro to higher-yielding European equities while the subsequent recovery was probably due to demand for the euro due to the positive CPI readings.

Watch Out For:

  • Canadian manufacturing sales (0.0% expected, -0.2% previous) at 1:30 pm GMT
  • Canadian foreign securities purchases (4.12B expected, 3.11B previous) also at 1:30 pm GMT
  • US Empire State manufacturing survey (-5.25 expected, -11.36 previous) at, you guessed it, 1:30 pm GMT
  • RBA Assistant Governor Christopher Kent has a speech in Sydney at 9:30 pm GMT

See also:

Asia Session Recap

U.S. Session Recap

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