London Session Forex Recap – Dec. 16, 2015

  • French services PMI: 50.0 vs. 50.8 expected, 51.0 previous
  • French manufacturing PMI: 51.6 vs. 50.6 expected, 50.6 previous
  • German services PMI: 53.0 vs. 52.8 expected, 52.9 previous
  • German manufacturing PMI: 53.0 vs. 52.8 expected, 52.9 previous
  • Euro Zone services PMI: 53.9 vs. 54.0 expected, 54.2 previous
  • Euro Zone manufacturing PMI: 53.1 vs. 52.8 expected, 52.8 previous
  • U.K. claimant count change: 3.9K vs. 0.8K expected, 0.2K previous
  • U.K. jobless rate: 5.2% vs. 5.3% expected, 5.3% previous
  • U.K. average earnings: 2.4% vs. 2.5% expected, 3.0% previous
  • Euro Zone HICP y/y: 0.2% vs. 0.1% expected, 0.1% previous
  • Euro Zone core HICP y/y: 0.9% as expected, same as previous
  • FOMC statement and New Zealand’s Q3 GDP for later

Lots of reports on the docket for today’s morning London forex session, but price action was rather subdued since forex traders were probably bracing themselves for the Fed’s highly-anticipated (probable) rate hike.

Most currency pairs were trading sideways, but pound, yen, and Greenback pairs were clearly violators of the peace.

Major Events:

Euro Zone flash PMI readings – France set the tone by posting a better-than-expected manufacturing PMI and a worse-than-expected services PMI reading, with Germany following suit. The PMI readings for the entire euro zone later came out and they also followed the same pattern of lower services PMI and improving manufacturing PMI, with manufacturing output expanding at the fastest rate “since April 2014” and services output growing at a “solid, but slowest [rate] since September” of this year.

U.K. jobs report – The jobless rate in the U.K. for the August to October period ticked lower to 5.2% from 5.3% while the employment climbed to a 73.9% (73.7% previous), which is a new all time high ever since records began in 1971. Unfortunately other components of the report weren’t that upbeat since more people than expected were applying for unemployment benefits given that claimant count increased by 3.9K (0.9K expected). The previous reading was revised from 3.3K to 0.2K, though, so it wasn’t that horrible. However, average earning only increased by 2.4% (2.0% without bonuses), which is not really helping with the inflation problem and could put a dent on consumer sentiment and spending.

Euro Zone CPI readings – The final annualized reading for the euro zone’s November CPI was revised higher to 0.2% from 0.1%, which is an improvement over October’s 0.1%. The monthly reading was disappointment, however, since CPI slipped by 0.1% (+0.1% previous). Anyhow, the major drags to annualized CPI were all energy-related, with the 23.8% slump in heating oil subtracting 0.21% from CPI and the 11.1% decline in “fuels for transport” subtracting a painful 0.54% from the CPI reading.

Risk-on day today – There was some risk-taking in the European equities market, with the pan-European FTSEurofirst 300 up by 0.70% to 1,421.50 and the DAX up by 0.91% to 10,546.00 during the forex session. Market analysts were mostly attributing the risk-on sentiment to the U.S. Fed’s highly-anticipated (probable) rate hike since it would be a vote of confidence on the U.S. economy.

Oil falls… again – Oil was down during the forex session, with U.S. crude oil down by 0.68% to $37.09 per barrel and Brent crude oil down by 1.96% to $37.97 per barrel. Analysts were pointing to speculation that the upcoming crude oil inventory data would be hinting at oversupply problems. They also pointed to speculation that the (probable) rate hike would likely cause the Greenback to spike higher, putting pressure on commodities. Forex Gump thinks the Greenback would sell off, however. Read his write-up here if ya wanna know why he thinks what he thinks.

Major Currency Movers:

GBP – Pound pairs weakened across the board when the London forex session opened. There weren’t any clear catalysts for the sudden weakness, though. The bleeding was temporarily stopped when the mixed readings for U.K. jobs data came out. The pound later resumed dropping lower, probably because forex traders were more focused on the poor reading for wage growth since that would not help pump up inflation at all and may even cause put a dent on consumer spending.

GBP/USD was down by 51 pips (-0.34%) to 1.4999, GBP/JPY was down by 79 pips (-0.43%) to 182.68, GBP/CAD was down by 38 pips (-0.18%) to 2.0650

JPY – Risk appetite prevailed during the forex session and there weren’t any apparent catalysts from or about Japan. Nevertheless, the Japanese yen was getting a lot of buyers, especially near the end of the forex session.

USD/JPY was down by 12 pips (-0.10%) to 121.79, CHF/JPY was down by 45 pips (-0.37%) to 122.84, EUR/JPY was down by 42 pips (-0.32%) to 132.93

USD – The Greenback was getting some buyers during the forex session. There weren’t any catalysts, so it was probably just preemptive positioning ahead of the U.S. Fed’s (probable) rate hike. They’re kinda late to the party if that is indeed the case, though.

USD/CHF was up by 28 pips (+0.28%) to 0.9913, USD/CAD was up by 20 pips (+0.15%) to 1.3767, EUR/USD was down by 24 pips (-0.21%) to 1.0916

Watch Out For:

  • 1:30 pm GMT: U.S. building permits (1.15m expected, 1.15M previous)
  • 1:30 pm GMT: U.S. housing starts (1.13M expected, 1.06m previous)
  • 2:15 pm GMT: U.S. industrial production (-0.2% expected, -0.2% previous)
  • 2:45 pm GMT: Markit’s flash U.S. manufacturing PMI (52.6 expected, 52.8 previous)
  • 3:30 pm GMT: U.S. crude oil inventories (-0.3M expected, -3.6M previous)
  • 7:00 pm GMT: FOMC rate decision and statement (rate hike from 0.25% to 0.50% expected)
  • 7:30 pm GMT: FOMC press conference
  • 9:45 pm GMT: New Zealand’s Q3 2015 GDP q/q (0.8% expected, 0.5% previous); read Forex Gump’s Forex Trading Guide for this event here

See also:

Asia Session Forex Recap

U.S. Session Forex Recap

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