London Session Forex Recap – Jan. 7, 2016

  • German factory orders m/m: 1.5% vs. 0.1% expected, 1.7% previous
  • German retail sales y/y: 0.2% vs. 0.5% expected, -0.1% previous
  • U.K. Halifax HPI m/m: 1.7% v.s 0.5% expected, 0.0% previous
  • Euro Zone retail sales m/m: -0.3% vs. 0.2% expected, -0.2% previous
  • Euro Zone consumer sentiment: unchanged at -5.7 as expected
  • Euro Zone economic sentiment: 106.8 vs. 106.0 expected, 106.1 previous
  • Euro Zone industrial sentiment: -2.0 vs. -2.9 expected, -3.2 previous
  • Euro Zone jobless rate: 10.5% vs. 10.7% expected, 10.6% previous

Risk aversion continued to dominate during today’s morning London forex session, so the safe-haven currencies were also dominating. One currency dominated the safe-havens, however.

Major Events:

Yet another round of risk aversion – We had another severe bout of risk aversion during the forex session after Chinese equities nose-dived (before being abruptly halted after just 15 minutes of trading) during the earlier Asian session. The pan-European FTSEurofirst 300 was down by a painful 3.34% to 1,345.88 while the DAX was down by 3.62% to 9,844.30 during the forex session. U.S. equity futures were also deeply in the red, with the S&P 500 futures down by 2.27% to 1,941.00 and the Nasdaq futures down by 2.97% to 4,314.50.

Broad-based commodity slide – Continuing concerns over Chinese equities and China’s economy as a whole weighed heavily on global commodity prices, with oil being one of the hardest hit. U.S. crude oil was down by 2.61% to $33.02 per barrel while Brent crude oil was down byb 1.84% to $33.52 per barrel during the forex session – both classifications are close to 12-year lows. Gold and silver, which are go-to assets during times of uncertainly, were doing a bit better, with gold up by 0.65% to $1,098.70 per troy ounce during the forex session. With regard to gold, it also probably helped that China announced the removal of license requirements on gold imports for industrial purposes.

Mostly positive euro zone data – The euro zone got a slew of mostly positive economic reports during the course of the forex session. First up was the better-than-expected reading for Germany’s factory orders, followed closely by Germany’s retail sales reading. The latter actually failed to meet the market’s expectations, but it was an improvement when compared to the previous reading. The retail sales reading for the entire euro zone that followed later was more of a disappointment, but on the flip side, the jobless rate ticked lower to 10.5%.

George Osborne’s cautious tone – U.K. Chancellor of the Exchequer George Osborne presented a more cautious tone during an earlier BBC interview, saying that “this year opens with a dangerous cocktail of new threats” and that “2016 is the year of mission critical.” This is a switch from his more upbeat statement during his Autumn statement wherein he said that their “long term economic plan is working” and that the British “economy [is] growing faster than its competitors.”

Major Currency Movers:

EUR – The euro was the mightiest currency of them all during today’s European session, beating out ALL of its forex rivals, including the safe-haven currencies. The string of mostly positive economic reports probably helped, but capital flows from European equities were probably more of a factor, in my opinion.

EUR/USD was up by 82 pips (+0.76%) to 1.0865, EUR/JPY was up by 49 pips (+0.39%) to 127.76, EUR/CHF was up by 25 pips (+0.24%) to 1.0874

Safe-havens – The safe-haven currencies (CHF, JPY, USD) were doing another victory dance due to the prevailing risk-off sentiment. Interestingly enough, European forex traders were now favoring the Swissy over the Japanese yen as the go-to safe-haven currency.

USD/JPY was down by 45 pips (-0.38%) to 117.56, CAD/JPY was down by 38 pips (-0.47%) to 83.12

CHF/JPY was up by 22 pips (+0.19%) to 117.51, USD/CHF was down by 54 pips (-0.55%) to 1.0005

Comdolls – Today was another risk-off day, so the higher-yielding comdolls (AUD, CAD, NZD) naturally tanked hard against the safe-havens yet again. One thing worth noting is that the Kiwi was relatively stable for most of the forex session, but suddenly gave out near the end. There were no clear catalysts for the sudden influx of sellers, though. Another thing worth noting is that Loonie pairs were the least vulnerable among the comdolls despite oil prices currently near 12-year lows, probably because forex traders were sitting on their hands ahead of BOC Poloz’s speech for later.

AUD/USD was down by 62 pips (-0.86%) to 0.6985, AUD/JPY was down by 101 pips (-1.21%) to 82.13

USD/CAD was up by 17 pips (+0.12%) to 1.4147, AUD/CAD was down by 73 pips (-0.74%) to 0.9884

NZD/USD was down by 60 pips (-0.91%) to 0.6598, NZD/CAD was down by 73 pips (-0.79%) to 0.9329

Watch Out For:

  • 1:25 pm GMT: BOC Governor Stephen Poloz has a speech
  • 1:30 pm GMT: U.S. initial jobless claims (275K expected vs. 287K previous)
  • 3:00 pm GMT: Canada’s Ivey PMI (56.7 expected, 63.6 previous)
  • 10:30 pm GMT: Australia’s AIG construction PMI (50.7 previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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