London Session Forex Recap – Dec. 8, 2015

  • Italy on Immaculate Conception holiday
  • French trade balance: -€4.58B vs. -€3.59B previous
  • U.K. Halifax house price index m/m: -0.2% vs. 0.2% expected, 1.1% previous
  • U.K. industrial production m/m: 0.1% as expected vs. 0.0% previous
  • U.K. manufacturing production m/m: -0.4% vs. -0.2% expected, 0.9% previous
  • Euro Zone revised GDP q/q: no revision from 0.3% as expected
  • Euro Zone revised GDP y/y: no revision from 1.6% as expected
  • Canadian housing data coming up

Risk aversion was the name of the game during today’s morning London forex session, so the safe-havens were really dominating. But which safe-haven currency was one currency to rule them all?

Major Events:

Risk aversion prevails – There was a noticeable lack of risk-taking during the European session, with the pan-European FTSEurofirst 300 down by 0.94% to 1,450.35 and the DAX down by 1.01% to 10,776.50. Risk aversion also threatens to infect the upcoming U.S. session since U.S. equity futures were in the red, with the S&P 500 futures down by 0.62% to 2,068.00 and Nasdaq futures down by 0.67% to 4,669.62 during the forex session. Many market analysts were pointing out that mining companies were the main drags, probably because…

Most commodities keep sliding, but oil recovers – Commodities resumed another round of declines, with gold down by 0.34% to $1,071.50 per troy ounce during the forex session. Oil was recovering, however, with Brent crude oil up by 1.40% to $41.30 per barrel and U.S. crude up by 0.65% to $37.89 per barrel during the London forex session. Many analysts were pointing to China’s appetite for cheap oil, as revealed in China’s trade balance report from earlier, as the main catalyst for the recovery.

Disappointing U.K. economic reports – The disappointment started with the Halifax house price index (HPI) printing a 0.2% decrease to 662.0 instead of a 0.2% increase between the months of October and November. This was followed shortly by a bigger-than-expected contraction in manufacturing production due to a 15.3% slump in the “manufacture of machinery & equipment not elsewhere classified,” which accounts for around 7.8% of manufacturing output and includes various industries such as the manufacture of general-purpose machinery, agricultural machinery, and forestry machinery, among others

On a slightly more upbeat note, overall industrial production showed a tiny 0.1% expansion when it was expected to remain stagnant. This was mainly due to the 6.7% increase in the mining and quarrying industry, which managed to offset the drag from manufacturing.

Major Currency Movers:

NZD – Another trading day, and yet another slide in commodity prices, so comdolls were naturally feeling some selling pressure from forex traders. Among the three comdolls (AUD, NZD, CAD), the Kiwi was clearly the weakest, probably because forex traders are still not done pricing-in a potential RBNZ rate cut.

NZD/USD was down by 37 pips (-0.56%) to 0.6616, NZD/CHF was down by 61 pips (-0.93%) to 0.6581, NZD/JPY was down by 52 pips (-0.63%) to 81.38

GBP – Disappointing data and the prevalence of risk-aversion was a toxic mix for the higher-yielding pound. The pound was considerably weak against the safe-haven currencies, but was able to fight off the comdolls, which were pretty weak during the forex session themselves.

GBP/USD was down by 66 pips (-0.44%) to 1.4984, GBP/CHF was down by 120 pips (-0.80%) to 1.4908, GBP/JPY was down by 102 pips (-0.55%) to 184.24

The safe-havens – The safe-haven currencies (JPY, USD, CHF) were the real winners during the forex session since the prevailing risk aversion during the European trading session likely convinced many forex traders to flee to the safe-havens. And the one safe-haven to rule them all was the Swissy since it was clearly winning out against the Greenback and the Japanese yen. Heck, it even won out against the euro, which was mostly ranging during the forex session. As for the weakest safe-haven, it was clearly the Greenback.

USD/CHF was down by 35 pips (-0.35%) to 0.9949, EUR/CHF was down by 34 pips (-0.31%) to 1.0817, AUD/CHF was down by 58 pips (-0.82%) to 0.7165

EUR/USD was up by 4 pips (+0.04%) to 1.0871, AUD/USD was down by 32 pips (-0.4) to4%) to 0.7203, USD/CAD was up by 56 pips (+0.42% 1.3574

USD/JPY was down by 16 pips (-0.13%) to 122.93, EUR/JPY was down by 9 pips (-0.07%) to 133.68, CHF/JPY was up by 28 pips (+0.23%) to 122.55

Watch Out For:

  • 1:15 pm GMT: Canadian housing starts (200.K expected, 198.1K previous)
  • 1:30 pm GMT: Canadian building permits (2.9% expected, -6.7% previous)
  • 3:00 pm GMT: U.S. JOLTS job openings (5.59M expected, 5.52M previous)
  • 3:00 pm GMT: U.K. NIESR GDP est. (0.6% previous)
  • 5:50 pm GMT: BOC Governor Stephen Poloz has a speech; text will be available here
  • 11:30 pm GMT: Westpac’s consumer confidence for Australia (101.7 previous)

See also:

Asia Session Forex Recap

U.S. Session Forex Recap

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