London Session Forex Recap – Jan. 11, 2016

  • Swiss retail sales: -2.1% vs. 0.3% expected, -1.1% previous
  • Euro Zone Sentix indicator: 9.6 vs. 11.4 expected, 15.7 previous
  • SNB sight deposits (domestic): CHF 404,004M vs. CHF 403,759M previous
  • Spanish industrial production: 4.2% vs. 3.8% expected, 4.1% previous

Not much on the docket for today’s morning London trading session, but forex price action among various currency pairs had a very noticeable theme – comdoll strength and weakness on the part of the safe-havens.

Major Events:

Risk appetite finally returns – Signs of risk-taking finally showed up during the European forex session, with the pan-European FTSEurofirst 300 up by 0.24% to 1,343.86 and the DAX up by 0.71% to 9,919.00. U.S. equity futures promise a risk appetite spillover into the U.S. market, too, with the S&P 500 futures up by 0.59% to 1,922.75 and Nasdaq futures up by 0.45% to 4,280.50 during the forex session. Most market analysts pointed to the yuan spike from earlier, which implied a possible PBoC intervention. However, I think profit-taking was the more likely cause given that Chinese equities were down in the dumps yet again, with the Shanghai composite index closing 5.29% lower to 3,016.70 for the day.

Commodities slide… again – Commodities were broadly in the red yet again, with U.S. crude oil down by 1.58% to $32.71 per barrel and Brent crude oil down by 1.96% to $33.32 per barrel during the forex session. Apparently, demand concerns over a slowing Chinese economy was the main reason for the slide, according to some analysts.

Higher SNB sight deposits – Sight deposits of domestic Swiss banks rose to CHF 404,004M during the week ending on January 8, up from CHF 403,759M for the week ending on January 1. This heavily implies that the SNB was up to its usual trick of intervening in the markets to weaken the Swissy yet again. Oh, for the forex newbies out there, sight deposits are very easy to withdraw and transfer and sight deposits in domestic Swiss banks, in particular, are part of the monetary base, so they are one of the main tools used by the SNB for currency purchases (i.e. market manipulation).

Major Currency Movers:

Comdolls – After being used as doormats by their forex rivals last week, the comdolls (AUD, NZD, CAD) finally stood up to and delivered a beatdown on their forex rivals, particularly the safe-havens, despite the slide in commodity prices. The Loonie, in particular, was rather strong even though oil prices were deep in the red and approaching 12-year lows. Comdoll strength was due, perhaps, to profit-taking and the return of risk appetite. And in the case of the Loonie, it’s also possible that European forex traders were pricing-in Canada’s strong jobs report from the previous week.

AUD/USD was up by 33 pips (+0.48%) to 0.7007, AUD/CHF was up by 47 pips (+0.70%) to 0.6985

NZD/USD was up by 27 pips (+0.42%) to 0.6566, NZD/JPY was up by 60 pips (+0.78%) to 77.30

USD/CAD was down by 69 pips (-0.49%) to 1.4099, EUR/CAD was down by 76 pips (-0.49%) to 1.5369

Safe-havens – After being on top for most of last week, the safe-havens (JPY, CHF, USD) were finally on the receiving end of a beatdown. Again, profit-taking and the return of risk appetite were likely the main drivers, but hints of SNB market manipulation from the increase in sight deposits was a possible a factor in the Swissy’s weakness.

USD/CHF was up by 18 pips (+0.18%) to 0.9966, EUR/CHF was up by 19 pips (+0.17%) to 1.0866

USD/JPY was up by 38 pips (+0.33%) to 117.70, CAD/JPY was up by 67 pips (+0.82%) to 83.46

Watch Out For:

  • 1:15 pm GMT: Canadian housing starts (200.0K expected, 211.9K previous)
  • 3:00 pm GMT: U.S. labor market conditions index (0.5% previous)
  • 3:00 pm GMT: BOC business outlook survey
  • 5:40 pm GMT: Atlanta Fed Dennis Lockhart is scheduled to speak

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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