London Session Forex Recap – Nov. 23, 2015

  • French flash manufacturing PMI: 50.8 vs. 50.6 expected, 50.6 previous
  • French flash services PMI: 51.3 vs. 52.2 expected, 52.7 previous
  • German flash manufacturing PMI: 52.6 vs. 52.0 expected, 52.1 previous
  • German flash services PMI: 55.6 vs. 54.4 expected, 54.5 previous
  • Euro Zone flash manufacturing PMI: 52.8 vs. 52.3 expected, 52.3 previous
  • Euro Zone flash services PMI: 54.6 vs. 54.1 expected, 54.1 previous
  • SNB sight deposits (domestic): CHF 402,695M vs. CHF 401,896M previous

Today’s morning London forex session was surprisingly active, with many currency pairs flashily bustin’ the moves in a volatility party, even though today’s a Monday. However, one currency which opted to stay in the corner and sulk was the euro since most euro pairs were trading sideways despite a slew of euro zone PMI readings.

Major Events:

Risk aversion returns – Risk aversion gripped the hearts and minds of market players during the European session, with the pan-European FTSEurofirst 300 down by 0.45% to 1,498.34 and the DAX down by 0.19% to 11,098.80 during the forex session. It also looks like risk aversion could potentially carry over into the upcoming US session since US equity futures are presently in the red, with the S&P 500 futures down by 0.14% to 2,085.75 and Nasdaq futures down by 0.09% to 4,685.38 during the forex session. Market analysts pointed to the continuing decline in commodity prices as the main culprit for the risk aversion.

Oil prices recover – Oil prices were actually down in the dumps at the start of the European session. That all changed, however, when news began to spread that Petroleo Brasileiro SA (a.k.a. Petrobas), Brazil’s state-run oil company, wasn’t able to produce 2.29 million barrels of oil due to a strike that began on Nov. 1. The biggest union already ended its strike on Nov. 14, but other unions are still apparently on strike. And their continued disruption probably sent oil prices higher due to less downward pressure from oversupply concerns. The law of supply and demand at work, people! Some analysts were pointing to Saudi talks  on stabilizing oil prices, however.

Anyhow, US crude was up by 1.06% to $42.34 per barrel after starting the session at over 1.0% in the red. Brent crude oil was up by 1.84% to $45.48 per barrel after also starting the forex session in the red.

Increase in SNB sight depositsSight deposits are one of the main tools used by the Swiss National Bank (SNB) for currency purchases (i.e. market manipulation) since they are funds “which can be transferred immediately and without restriction to another account or which can be converted into cash.” And according to a press release that was, uh, released by the SNB, the sight deposits of domestic Swiss banks climbed higher to CHF 402,695 million for the week ending on Nov. 20 from the previous week’s CHF 401,896 million. Hmm. The Swissy was one of the weakest currencies last week, so it’s highly likely that the SNB was up to its old tricks.

Major Currency Movers:

CAD – The Loonie started the forex session by edging lower, probably because of the risk-off sentiment and continuing decline in oil prices. However, the turnaround in oil prices placed a smile on the faces of Loonie bulls and they probably pushed the “buy me some Loonies” button as hard and as fast as they could since the Loonie popped higher like a cork, erasing its losses and ending the session on a strong note.

USD/CAD was down by 28 pips (-0.21%) to 1.3361, EUR/CAD was down by 30 pips (-0.21%) to 1.4195, NZD/CAD was down by 27 pips (-0.31%) to 0.8692

AUD – The Aussie’s a mystery since it kept grinding higher during the forex session before finally pushing higher with surprising momentum near the end. And the high-yielding Aussie did all that even though there weren’t any direct catalysts and the prevailing risk aversion would normally have kept forex traders at bay. Perhaps the earlier Aussie weakness was just a correction, and the technical breakouts on Aussie pairs that I mentioned in my latest Top Forex Market Movers of the Week are still in play?

AUD/USD was up by 14 pips (+0.19%) to 0.7187, AUD/NZD was up by 35 pips (+0.32%) to 1.1050, AUD/JPY was up by 20 pips (+0.22%) to 88.57

GBP – Pound pairs were showing weakness pretty much across the board. There weren’t any major catalysts that could account for the pound’s weakness, though, but it’s probably safe to conclude that the high-yielding pound was a victim of the prevailing risk-off sentiment.

GBP/USD was down by 19 pips (-0.13%) to 1.5127, GBP/JPY was down by 25 pips (-0.13%) to 186.34, GBP/CAD was down by 57 pips (-0.28%) to 2.0224

CHF – Like the other safe-haven currencies, the Swissy got some demand at the start of the forex session due to risk aversion causing some forex trades to flee to the Swissy. However, most Swissy pairs later stabbed Swissy bulls in the back by weakening pretty hard. The only catalysts I found was that report on yet another increase in SNB sight deposits, which most likely means that the SNB was sneakily weakening the Swissy yet again. And if you stop and think about it, it’s also possible that the SNB is to blame for today’s weakness.

USD/CHF was up by 17 pips (+0.17%) to 1.0208, EUR/CHF was up by 24 pips (+0.22%) to 1.0850, AUD/CHF was up by 26 pips (+0.36%) to 0.7337

Watch Out For:

  • Markit’s US flash manufacturing PMI (54.0 expected, 54.1 previous) at 2:45 pm GMT
  • US existing home sales (5.40M expected, 5.55M previous) at 3:00 pm GMT

See also:

Asia Session Recap

U.S. Session Recap

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