London Session Forex Recap – Nov. 24, 2015

  • German final GDP q/q: unrevised at 0.3% as expected
  • German final GDP y/y: unrevised at 1.7% as expected
  • French INSEE manufacturing confidence: 102 as expected vs. 103 previous
  • German IFO business climate: 109 vs. 108.2 expected, 108.2 previous
  • German IFO current conditions 113.4 vs. 112.4 expected, 112.7 previous
  • Preliminary estimate for Q3 US GDP later

Lower-yielding currencies and higher-yielding ones fought it out during today’s morning London forex session. It was a lopsided battle, however, since the risk-off sentiment was clearly favoring the lower-yielding safe-havens.

Major Events:

Risk aversion due to security jitters – European market players were clearly not too keen on taking risks, with the pan-European FTSEurofirst 300 down by 1.37% to 1,479.54 and the DAX down by 1.24% to 10,955.00 during the forex session. US equity futures were feeling the pain as well, with the S&P 500 futures down by 0.50% to 2,073.75 and Nasdaq futures down by 0.59% to 4,648.25.

The risk aversion was attributed mainly to security jitters amidst reports of a Russian jet being shot down by Turkey, as well as the worldwide travel warning issued by the US over terror threats.

RBA Stevens’ speech – Reserve Bank of Australia (RBA) Governor Glenn Stevens gave a speech earlier (read it here). Well, it was really more of a lecture on the “probabilistic” nature of the Bank’s outlook and forecasts as well as the importance of understanding the “big forces at work.”

But there were some goodies for short-term forex traders as well. For instance, he noted that effects of the Aussie’s past declines “are proving a bit slow to come through.” He also stated that the slow wage growth is not really helping in pumping up inflation, and that inflation wouldn’t therefore “be a barrier to further easing of monetary policy, should that be useful to support demand.” Woah!

On a more upbeat note, RBA Stevens also said that “A number of data points over recent months suggest that prospects for firmer conditions in the non-mining economy are improving,” among others.

BOE inflation report hearingsBOE Carney and friends had a Q&A session with members of the British parliament today, and there were a couple of interesting statements. For Governor Carney’s part, he stated that “It is a key assumption in the forecast that there will be this mild deceleration in the rate of productivity growth before it picks back up again.”

And when asked about the impact of falling energy prices, ever-optimistic Carney answered that “the net impact of these falls in energy prices is to reinforce the growth in incomes and as a consequence [Britons] have the highest growth in real incomes since the crisis.” He also lamented about the strong pound’s negative effects and the pressure on central bank independence.

BOE chief Economist Andy Haldane was less optimistic. He stated, for example, that he sees “see the balance of risks around UK GDP growth and inflation as skewed materially to the downside, more so than embodied in the November 2015 Inflation Report.” When asked on his stance on monetary policy, however, Haldane said that he has a neutral stance since monetary policy “needs to be poised to move in either direction in the period ahead, depending on how the data and risks, domestic and international, play out.”

Major Currency Movers:

AUD – All the other high-yielding comdolls were getting clobbered due to the prevailing risk-off sentiment, but the Aussie was marching to the beat of a different drummer at the start of the forex session at least.

Like the other comdolls, the Aussie started the forex session on a weak footing. Unlike the other comdolls, however, the Aussie’s drop was noticeably strong. This was most likely a reaction to RBA Stevens’ comment that “further easing of monetary policy, should that be useful to support demand.”

The overall tone of his speech and his comments about improving conditions in Australia implied that a rate cut was not in the cards, however, which is probably why the Aussie popped higher later on. The Aussie was having trouble winning out against the safe-havens, however.

AUD/USD was up by 3 pips (+0.04%) to 0.7215 with 0.7189 as session low, AUD/NZD was up by 28 pips (+0.25%) to 1.1077 with 1.1016 as session low, AUD/CAD was up by 16 pips (+0.17%) to 0.9633 with 0.9595 as session low

GBP – The pound showed considerable weakness throughout the course of the forex session. This was most likely because of the risk aversion during the forex session, but the comments from Governor Carney as well as Chief Economist Haldane, especially the not-too-happy ones, were probably weighing-in on the pound as well.

GBP/USD was down by 65 pips (-0.43%) to 1.5081, GBP/JPY was down by 99 pips (-0.54%) to 184.78,GBP/CHF was down by 96 pips (-0.62%) to 1.5336

CHF – Among the safe-havens (USD, JPY, CHF), the Swissy reigned supreme. There were no catalysts that could have enticed forex traders to favor the Swissy over the other safe-havens, however. It’s possible that forex traders were just avoiding the yen and the Greenback given that Japan and the US have upcoming reports.

USD/CHF was down by 20 pips (-0.20%) to 1.0169, CAD/CHF was down by 28 pips (-0.38%) to 0.7612, CHF/JPY was up by 12 pips (+0.10%) to 120.49

Watch Out For:

  • 1:30 pm GMT Q3 2015 US GDP (2.1% expected, 1.5% previous)
  • 1:30 pm GMT US goods trade balance (-$60.90B expected, -$59.15B previous)
  • 1:30 pm GMT GDP price index (1.2% expected, 1.2% previous)
  • 2:00 pm GMT S&P/CS US HPI (5.10% expected, 5.09% previous)
  • 3:00 pm GMT CB US consumer confidence (99.5 expected, 97.6 previous)

See also:

Asia Session Recap

U.S. Session Recap

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