London Session Forex Recap – Nov. 19, 2015

  • Swiss trade balance: 4.16B vs. 3.25B previous
  • UK retail sales m/m: -0.6% vs. -0.5% expected, 1.7% previous
  • UK core retail sales m/m: -0.9% vs. -0.6% expected, 1.5% previous
  • UK retail sales reading y/y: 3.8% vs. 4.5% expected, 6.2% previous
  • UK core retail sales y/y: 3.0% vs. 3.9% expected, 5.7% previous
  • UK CBI industrial order expectations: -11 vs. -10 expected, -18 previous
  • PBoC: cuts overnight rate from 4.5% to 2.75%
  • PBoC: cuts seven-day rates from 5.5% to 3.25%

Whoo wee! Today’s morning London forex session was pretty hectic, with lots of events and the volatility to show for it. Overall forex price action was rather choppy, though, with little in terms of major directional moves.

Major Events:

Risk-on!According to some analysts, the current bout of risk-appetite is still due to yesterday’s FOMC minutes and Greenback weakness, which then sparked a commodity rally. Oil prices were apparently leading the way due to Greenback weakness, with Brent crude oil up by 1.29% to $44.71 per barrel and US crude up by 0.80% to $42.28 per barrel during the forex session. As for European equities, the pan-European FTSEurofirst 300 was up by 1.01% to 1,510.90 while the DAX was up by a 1.62% to 1,137.30

UK October retail sales report – Forex Gump mentioned in his Forex Trading Guide for the UK retail sales report that leading indicators were pointing to a downturn in retail sales volume for the October period. Well, looks like the leading indicators were right since all October retail sales volume readings got hit, and the amount spent even decreased by 0.7% month-on-month to boot. The only good news is that long-term trends are still in positive territory despite the drops. The annualized headline reading’s increase of 3.8%, for example, still marks the 30th consecutive month of growth, even though it’s significantly slower than the previous +6.2% reading.

Chinese rate cut – Forex Gump advertised his Economic Review for China by quoting Premier Li Keqiang’s November 11 promise to use “several powerful policy weapons to boost growth,” and Forex Gump then ended his piece with a poll on whether or not China would be introducing more easing moves. Well, we just got an answer because China cut rates again.

However, it’s a bit different this time since China seems to be targeting smaller lenders rather than the large state-owned/controlled banks given that it only slashed the rates on one-week loans by banks and credit cooperatives from 5.5% to 3.25%. Although the People’s Bank of China also cut the overnight rate from 4.5% to 2.75%. The rate cuts will take effect tomorrow.

ECB minutesThe ECB noted in their minutes that the ECB’s measures “might not be gaining sufficient traction in the present environment to achieve their ultimate objective in terms of inflation rates” and that they must therefore re-examine the degree of monetary policy accommodation at the December meeting. Yeah, they practically reiterated everything that ECB Draghi said during the press conference, but the euro reacted nevertheless, as noted below.

Major Currency Movers:

GBP – The pound showed weakness from the very start of the forex session, and that weakness only intensified when the Uk reported a downturn in retail sales volume. There was no major selloff, however, probably because forex traders were being enticed by risk-taking to give the higher-yielding pound some loving. Well, that or forex traders who shorted early were taking some profits off the table.

GBP/USD was down by 10 pips (-0.07%) to 1.5259, GBP/JPY was down by 47 pips (-0.25%) to 187.88, GBP/AUD was down by 53 pips (-0.25%) to 2.1287

AUD – The risk-taking during the forex session was kind to the the high-yielding Aussie, however, the Aussie was the only comdoll that managed to benefit from the prevailing risk-on sentiment. The lack of demand for the Kiwi is understandable due to the recent negative outcome for the dairy auction and the RBNZ’s openness to further rate cuts, but I find it rather weird that there was little to no demand for the Loonie given the surge in oil prices during the forex session. Oh, well.

AUD/USD was up by 14 pips (+0.21%) to 0.7167, AUD/CHF was up by 19 pips (+0.27%) to 0.7299, AUD/CAD was up by 20 pips (+0.21%) to 0.9519

EUR – The low-yielding euro initially climbed higher despite the prevailing risk-on sentiment. There were no direct catalysts, but it’s possible that forex traders were opening preemptive positions or liquidating their shorts ahead of the ECB minutes in anticipation of goods news. But when the ECB minutes didn’t reveal anything new that we haven’t heard before, the euro decided to take a dive, or more likely, was pushed down by disappointed forex traders.

EUR/USD was up by 21 pips (+0.20%) to 1.0695 with 1.0717 as session high, EUR/GBP was up by 15 pips (+0.22%) to 0.7006 with 0.7019 as session high, EUR/CHF was up by 26 pips (+0.25%) to 1.0890 with 1.0898 as session high

JPY – The safe-haven yen was surprisingly strong throughout the forex session. There weren’t any catalysts that could account for the yen’s strength, however, but it’s possible that European forex traders are pricing-in the BOJ’s defiance from earlier in maintaining the current monetary policy despite the Japanese economy’s slide into yet another recession.

USD/JPY was down by 29 pips (-0.24%) to 123.07, CAD/JPY was down by 20 pips (-0.21%) to 92.69, CHF/JPY was down by 34 pips (-0.29%) to 120.85

Watch Out For:

  • Canadian wholesales sales (0.2% expected, -0.1% previous) at 1:30 pm GMT
  • US initial jobless claims (270K expected, 276K previous) also at 1:30 pm GMT
  • Philadelphia Fed survey (-0.3 expected, -4.5 previous) and US CB leading indicator (0.5% expected, -0.2% previous) at 3:00 pm GMT
  • SNB Governing Board Member Andrea Maechler is scheduled to speak in Geneva at 5:30 pm GMT

See also:

Asia Session Recap

U.S. Session Recap

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