London Session Forex Recap – Dec. 1, 2015

  • Swiss Q3 GDP q/q: 0.0% vs. 0.2% expected, 0.2% previous
  • Spanish manufacturing PMI: 53.1 vs. 51.9 expected, 51.3 previous
  • French manufacturing PMI: 50.6 vs. 50.8 expected, 50.8 previous
  • German manufacturing PMI: 52.9 vs. 52.6 expected, 52.6 previous
  • German jobless rate: 6.3% vs. 6.4% expected, 6.4% previous
  • German jobless change: -13K vs. -5K expected, -6K previous
  • UK manufacturing PMI: 52.7 vs. 53.5 expected, 55.2 previous
  • Euro zone jobless rate: 10.7% vs. 10.8% expected, 10.8% previous
  • Dairy auction currently underway
  • Canadian GDP coming up

Risk appetite and lots of reports meant that today’s morning London forex session was a rather lively one. Wanna know which currencies got some lovin’ from forex traders?

Major Events:

UK banking system stress test resultAccording to the report from the BOE’s Financial Policy Committee, “no macroprudential actions on bank capital were required in response to the 2015 stress test” and that “The stress-test results suggest that the banking system is capitalised to support the real economy in a severe global stress scenario, which adversely affects the United Kingdom.” What did all those words mean, you ask? Well, I have three words for you: the banks passed.

Commodities rally – Most commodities were in the green during the forex session, with US crude oil up by 0.16% to $41.72 per barrel and gold up by 0.24% to $1,067.90 per troy ounce. Obviously, this was goods news for the comdolls.

Risk appetite spill over – The risk-on sentiment from the earlier Asian session spilled over into the European. While risk-taking was so rampant during the Asian session that the Nikkei closed above 20,000 points for the first time in 3 months and the Hang Seng had the biggest rally in 3 weeks, European markets were more modest, with the pan-European FTSEurofirst 300 up by 0.19% to 1,520.94 during the forex session. Market analysts noted that European mining and banking companies were leading the way, thanks to the result of the stress test on the UK banking system and a commodity rally, which I already discussed above.

Lower UK manufacturing PMI – The reading for November’s manufacturing PMI for the UK was still above the 50.0 neutral mark at 52.7, but it failed to meet the market’s expectations and it was lower than the previous reading of 55.2 to boot. The PMI report blamed the lower reading on “Output and new orders [expanding] at slower rates.” Also, employment levels were “close to stagnation,” and Markit’s Senior Economist, Rob Dobson, commented that “the manufacturing numbers stills exposes a number of weaknesses” since “Growth remains heavily focussed on the domestic consumer.”

Net positive euro zone dataSpain’s manufacturing PMI for November set the tone with a better-than-expected reading due to a “sharper rise in output and new orders.” Germany also printed a better-than-expected reading for its November manufacturing PMI while France’s manufacturing PMI was a bit of a disappointment since it ticked a wee bit lower. After that, Germany released a rather positive jobs report, with the jobless rate falling to 6.3%, which is supposedly the lowest ever since the reunification of Eastern and Western Germany, according to some analysts (who apparently know how to make things sound more dramatic). The jobless rate for the entire euro zone later followed suit, reporting a downtick from 10.8% to 10.7%, the lowest ever since January 2012.

Major Currency Movers:

CAD & AUD – The high-yielding Loonie, as well as the Aussie, were getting some buyers during the forex session, thanks to the risk-on sentiment in general and the commodities rally. In the Loonie’s case, however, it’s also possible that forex traders were opening preemptive positions or unwinding their shorts ahead of Canada’s GDP reading for later. The Kiwi is a high-yielding comdoll, too, but there was very little demand for the Kiwi, most likely because another dairy auction is currently underway, so forex traders were probably avoiding it.

USD/CAD was down by 27 pips (-0.20%) to 1.3315, GBP/CAD was down by 70 pips (-0.36%) to 2.0076, NZD/CAD was down by 25 pips (-0.29%) to 0.8853

AUD/USD was up by 14 pips (+0.20%) to 0.7291, AUD/JPY was up by 38 pips (+0.43%) to 89.79, AUD/CHF was up by 29 pips (+0.40%) to 0.7503

GBP – Most pound pairs jumped at the start of the forex session on the back of prevailing risk-on sentiment and the news that the UK banking system was doing A-Okay. However, the positive sentiment on the pound quickly turned sour when the reading for November’s UK manufacturing PMI was revealed to be lower-than-expected. Worse still, the report was pointing to lower output and fewer new orders for the lower reading, which could potentially drag down GDP growth.

GBP/USD was down by 30 pips (-0.20%) to 1.5069 with 1.5125 as session high, GBP/CAD was up by 6 pips (+0.04%) to 185.58 with 185.94 as session high, GBP/CHF was down by 3 pips (-0.02%) to 1.5502 with 1.5545 as session high

EUR – The euro was mixed during the forex session since it made relatively large gains against the safe-havens and the weak pound, but traded sideways against most of the comdolls. Demand for the euro was most likely being driven by the string of positive data points that came out during the forex session, but the risk appetite meant that forex traders were probably more interested in the higher-yielders rather than the low-yielding euro, which is probably why the euro didn’t do too well against ’em.

EUR/USD was up by 15 pips (+0.15%) to 1.0599, EUR/JPY was up by 51 pips (+0.39%) to 130.54, EUR/CHF was up by 40 pips (+0.37%) to 1.0909

Watch Out For:

  • Canadian GDP at 1:30 pm GMT m/m (0.0 expected, 0.1% previous)
  • Final reading for Markit’s US manufacturing PMI at 2:45 pm GMT (unrevised at 52.6 expected, 52.6 previous month)
  • US construction spending at 3:00 pm GMT (0.5% expected, 0.6% previous)
  • US ISM manufacturing PMI at 3:00 pm GMT (50.5 expected, 50.1 previous)
  • Chicago Fed President will talk about his economic outlook at 5:45 pm GMT
  • RBA Governor Glenn Stevens has a speech in Perth at 11:30 pm GMT
  • Dairy auction currently underway, so keep an eye on the Kiwi; auction results are usually out by 2:00 pm GMT (2:07 pm GMT previous)

See also:

Asia Session Forex Recap

U.S. Session Forex Recap

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