London Session Forex Recap – Nov. 18, 2015

  • Swiss ZEW economic expectations: 0.0 actual vs. 18.3 previous
  • BOE Broadbent: “solid recovery” in UK domestic demand
  • BOE Broadbent: US economic recovery is “not that strong”
  • BOE Broadbent: “euro zone has started to grow”
  • US housing data on tap
  • FOMC meeting minutes later

Not much on the docket, but today’s morning London forex session was pretty interesting nevertheless, as forex traders tuned in to BOE Broadbent’s speech and market sentiment for direction.

Major Events:

Paris shootout over? – European equities began to slowly recover and US equity futures were finally pushed into the green, with the S&P 500 futures up by 0.18% to 2,052.75 and NASDAQ futures up by 0.21% to 4,579.25, shortly after it was announced that the police raid and shootout in Paris was finally over. Market players probably breathed a sigh of relief, but security jitters were still probably a concern in the European markets since…

Risk aversion continues – Moderate levels of risk aversion from the earlier Asian session managed to make its way into the European session, with the FTSEurofirst 300 down by 0.59% to 1,489.53 and the DAX down by 0.76% to 10,887.50. Many analysts blamed the continuing security jitters for the risk-off sentiment while other analysts pointed to declining commodities, especially copper. Oil was doing okay, though, due to “reports of falling stockpiles and rising refinery activity in the Unites States,” according to an article from Reuters.

BOE Broadbent’s speech and Q&A session – BOE Deputy Governor and MPC Member Dr. Ben Broadbent delivered a speech at the Reuters Newsmaker event today. And while he had a lot of interesting things to say, he also refrained from giving forex traders a date on when, or even a promise that the BOE will be hiking rates any time soon since “the yield curve is very flat.”

In the Q&A session that followed, Dr. Broadbent also discussed a lot of things, but what probably caught the attention of most forex traders were his comments that the British economy has “seen solid recovery in domestic demand in both consumption and investment against a backdrop of weaker global growth,” that the UK’s “single biggest trading partner the eurozone has started to grow,” and that “at the same time the U.S. recovery is not that strong.” Market-moving words right there.

Major Currency Movers:

GBP – The high-yielding pound was pretty soft at the start of the forex session, probably because of the prevailing risk-off sentiment. However, all that changed when BOE Broadbent began talking.

Dr. Broadbent may not have been too keen on giving a date for a rate hike, or even a promise that the BOE will be hiking rates, but the totality of his speech implied that the BOE is still open to hiking rates – it’s just that the British economy is not quite ready yet. That tidbit and his later comments during the Q&A session that domestic demand in the UK is A-okay probably helped to pump up demand for the pound.

GBP/USD was up by 12 pips (+0.08%) to 1.5217, GBP/JPY was up by 19 pips (+0.11%) to 187.70, GBP/NZD was up by 38 pips (+0.16%) to 2.3493

EUR – The low-yielding euro was probably welcoming capital flows from European equities with open arms since most euro pairs started the forex session by climbing higher while European equities were sinking deeper.

The euro then got another boost when BOE Broadbent started speaking. Maybe euro bulls caught that juicy comment about the euro zone starting to grow? Anyhow, euro pairs later began giving up some of their gains when security jitters over the shootout in Paris began to fade away when reports began to spread that the conflict was finally over.

EUR/USD was up by 19 pips (+0.18%) to 1.0669, EUR/JPY was up by 31 pips (+0.23%) to 131.62, EUR/NZD was up by 45 pips (+0.27%) to 1.6471

USD – The Greenback fell back on BOE Broadbent’s comment that “the U.S. recovery is not that strong” and the pound’s overall strength, but later found support and enough buyers to stage a comeback against most of its forex rivals. I say “most” because the Greenback didn’t have enough buyers to give the euro and the pound their comeuppance.

Demand for the Greenback seems to be linked to US equity futures finally clawing their way back into the green and implying a strong open for US equities, but it’s also possible that forex traders were opening preemptive positioning ahead of the FOMC meeting minutes for later.

USD/JPY was up by 9 pips (+0.08%) to 123.39 with 123.18 as session low, USD/CHF was up by 7 pips (+0.07%) to 1.0153 with 1.0120 as session low, USD/CAD was up by 5 pips (+0.04%) to 1.3318 with 1.3294 as session low

Watch Out For:

  • US housing starts (1.16M expected, 1.21M previous) and building permits (1.15M expected, 1.10M previous) at 1:30 pm GMT
  • US crude oil inventories (2.0M expected, 4.2M previous) at 3:30 pm GMT; tends to affect CAD forex price action rather than USD
  • US FOMC meeting minutes at 7:00 pm GMT; Forex Gump has write-up on what most forex traders usually look for (read it here)
  • New Zealand’s PPI output (-0.2% previous) and input (-0.3% previous) at 9:45 pm GMT

See also:

Asia Session Recap

U.S. Session Recap

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