London Session Forex Recap – Dec. 17, 2015

  • German IFO business climate: 108.7 vs. 109.0 expected, 109.0 previous
  • German IFO current conditions: 112.8 vs. 113.4 expected, 113.4 previous
  • U.K. retail sales m/m: 1.7% vs. 0.6% expected, -0.5% previous
  • U.K. retail sales y/y: 5.0% vs. 3.0% expected, 4.2% previous
  • U.K. core retail sales m/m: 1.7% vs. 0.5% expected, -0.8% previous
  • U.K. core retail sales y/y: 3.9% vs. 2.3% expected, 3.2% previous
  • U.K. CBI industrial trends: -7 vs. -10 expected, -11 previous

Price action was rather choppy during today’s morning London forex session, and volatility was relatively subdued when compared to the earlier sessions. Nevertheless, we got enough directional movement and volatility from Kiwi, Greenback, and pound pairs to keep the forex session interesting.

Major Events:

Dip in German IFO business climateOptimism among business in Germany, the largest euro zone economy, waned a bit from 109.0 to 108.7 amid deteriorating business conditions. All sectors took a hit, with the manufacturing sector (12.3 current vs. 12.1 previous) being the only exception, which is actually kinda good since the German economic growth is powered mainly by the export-oriented manufacturing sector.

U.K. retail salesThe U.K. retail sales volume for the November period jumped by 1.7% while the reading for the October period was slightly upgraded from -0.6% to -0.5%. Looking at the specifics of the report yield a less upbeat picture, however, since the amount spent by consumers only increased by 1.4%.

The disparity between sales volume and amount spent becomes even clearer when you look at the annualized readings and realize that the amount spent by consumers only increased by 1.4% and average store prices fell by 3.3%, even though retail sales volume increased by 5.0%. And the retail sales report doesn’t say it, but the jump in retail sales volume was most likely due to the so-called Black Friday shopping frenzy, so the jump is probably not gonna be sustainable and some normalization is to be expected in the future.

Lots of risk-taking – The FOMC hangover persisted into today’s morning London forex session since there was a lot of risk appetite, which was most obvious in European equities, with the pan-European FTSEurofirst 300 up by a very solid 2.14% to 1,446.08 and the DAX up by an awesome 3.23% to 10,807.80 during the forex session. Most commodities were in the red due to the strong dollar, however, with gold down by 1.07% to $1,065.30 per troy ounce during the forex session.

Major Currency Movers:

NZD – Kiwi pairs were mostly grinding higher during the forex session. The prevalence of risk appetite probably was probably generating capital flows to the higher-yielding Kiwi, but it’s also likely that European forex traders were pricing-in the faster-than-expected expansion for New Zealand’s Q3 2015 GDP. Another possible reason is that forex traders were just taking some delicious profits off the table after the Kiwi’s earlier weakness.

NZD/USD was up by 22 pips (+0.34%) to 0.6750, NZD/JPY was up by 31 pips (+0.38%) to 82.67, NZD/CAD was up by 45 pips (+0.50%) to 0.9336

GBP – Most pound pairs started the London forex session with a violent tug-of-war between bulls and bears, with the bulls finally winning out. This was likely due to demand for the high-yielding pound due to the prevailing risk-on sentiment, but speculation over the upcoming retail sales report was probably a factor too.

Speaking of the retail sales report, pound pairs accelerated their bullish momentum about 30 minutes before the release of the report, which was rather weird. This could have been due to a sneaky leak or just the typical buy the rumor sell the news kind of scenario that we’ve been seeing more and more lately. In any case, pound pairs encountered lots of sellers after the retail sales report came out and kept weakening for the rest of the forex session.

GBP/USD was down by 19 pips (-0.13%) to 1.4921 with 1.5008 as session high, GBP/NZD was down by 75 pips (-0.34%) to 2.2124 with 2.2215 as session high, GBP/JPY was down by 15 pips (-0.08%) to 182.74 with 183.62 as session high

USD – The Greenback continued to get buyers across the board, as European forex traders priced-in yesterday’s rate hike and upbeat FOMC statement. The Greenback’s only nemesis during the forex session was the Kiwi.

USD/CHF was up by 12 pips (+0.12%) to 0.9966, USD/JPY was up by 9 pips (+0.08%) to 122.51, USD/CAD was up by 23 pips (+0.17%) to 1.3832

Watch Out For:

  • 1:30 pm GMT: U.S. Philadelphia Fed survey (1.0 expected, 1.9 previous)
  • 1:30 pm GMT: U.S. initial jobless claims (275K expected, 282K previous)
  • 1:30 pm GMT: U.S. current account (-$118.9B expected, -$109.7B previous)
  • 3:00 pm GMT: U.S. CB leading indicator (0.1% expected, 0.6% previous)

See also:

Asia Session Forex Recap

U.S. Session Forex Recap

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