London Session Forex Recap – Dec. 11, 2015

  • German HICP m/m: 0.1% as expected, same as previous
  • German HICP y/y: 0.3% as expected, same as previous
  • Italian industrial production m/m: 0.5% vs. 0.3% expected, 0.2% previous
  • French current account: -€1.4B vs. €0.B previous
  • U.K. construction output m/m: 0.2% vs. 1.0% expected, 0.0% previous
  • U.K. construction output y/y: 1.0% vs. -1.1% expected, -0.3% previous
  • U.S. retail sales and PPI coming up

There were only low-tier economic reports and events during today’s morning London session, so forex traders turned once more to risk sentiment and commodities for direction.

Major Events:

Risk aversion is here to stay – After a brief appearance, which was especially noticeable in the Japanese stock market, risk appetite was promptly beaten back and thrown out the door when the European session rolled in. The pan-European FTSEurofirst 300 was down by 1.49% to 1,406.85 while the DAX was down by 1.76% to 10,412.00 during the forex session, with energy stocks leading the plunge. Risk aversion also looks poised to infest the upcoming U.S. session since U.S. equity futures were deep in the red, with the S&P 500 futures down by 0.73% to 2,034.25 and Nasdaq futures down by 0.85% to 4,604.62 during the forex session.

The commodity rout continues – Commodities dropped lower during the forex session, with gold down by 0.76% to $1,063.90 per troy ounce and iron ore down 4.3% to $38.30 per dry metric ton for the week, marking the ninth straight week of declines. Oil was down as well, with Brent crude oil down by 1.70% to a seven-year low of $39.05 per barrel and U.S. crude oil down by 1.24% to $36.30 per barrel during the forex session. Many analysts were attributing today’s decline in oil prices to the International Energy Agency’s warning that global oversupply in oil isn’t gonna be letting up next year, which makes sense given that OPEC didn’t agree to cutting back on production.

Major Currency Movers:

JPY – The yen was once again the safe-haven currency of choice for most forex traders during the European session since it was clearly beating ALL of its forex rivals, including its fellow safe-haven currencies (USD & CHF). Meanwhile, the U.S. dollar was the weakest safe-haven currency of them all, even though there weren’t any clear catalysts and the upcoming retail sales and PPI reports are expected to improve. Maybe some forex traders are exiting their Greenback longs ahead of next week’s FOMC statement?

AUD/JPY was down by 95 pips (-1.08%) to 87.57, USD/JPY was down by 50 pips (-0.41%) to 121.42, CHF/JPY was down by 47 pips (-0.39%) to 122.97

EUR – The low-yielding euro was getting some buyers due to all that risk aversion, too. All that red in European equities usually means capital flows into the euro, after all. The euro was practically winning out against everything. It even managed to edge higher against the Swissy and the Greenback, but it still failed to win out against the mighty yen.

EUR/USD was up by 7 pips (+0.07%) to 1.0959, EUR/AUD was up by 110 pips (+0.73%) to 1.5194, EUR/NZD was up by 107 pips (+0.67%) to 1.6278

Comdolls – Risk aversion and falling commodity prices naturally means lower demand (and lots of shorts) on the comdolls, with the Aussie being apparently the weakest. I guess forex traders were really disappointed that iron ore has been declining for nine straight months and even fell to a record low during the week.

AUD/USD was down by 47 pips (-0.65%) to 0.7212, AUD/CHF was down by 48 pips (-0.67%) to 0.7121

USD/CAD was up by 24 pips (+0.18%) to 1.3666, EUR/CAD was up by 38 pips (+0.26%) to 1.4977

NZD/USD was down by 39 pips (-0.59%) to 0.6730, NZD/JPY was down by 83 pips (-1.01%) to 81.73

Watch Out For:

  • 1:30 pm GMT: Headline (0.3% expected, 0.1% previous) and core (0.3% expected, 0.2% previous) readings for U.S. retail sales
  • 1:30 pm GMT: Headline (0.0% expected, -0.4% previous) and core (0.1% expected, -0.3% previous) readings for U.S. PPI
  • 3:00 pm GMT: The preliminary result for the University of Michigan’s consumer sentiment survey (92.0 expected, 91.3 previous)
  • 3:00 pm GMT: U.S. business inventories (0.1% expected vs. 0.3% previous)

See also:

Asia Session Forex Recap

U.S. Session Forex Recap

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