London Session Forex Recap – Jan. 18, 2016

  • Italian trade balance: €4.41B vs. €3.24B expected, €4.82B previous
  • U.S. banks will be observing Martin Luther King Jr. Day

The forex calendar for today’s morning London trading session was practically empty, so most currency pairs were happily milling about in tight ranges. The only breakers of the peace were the Loonie and the Japanese yen.

Major Events:

Oil prices recover – After tumbling hard earlier as a reaction to the lifting of sanctions on Iran, oil prices were able to stage a recovery during the European session, with Brent crude oil up by 1.28% to $29.29 per barrel. U.S. crude oil was even able to climb back above the $30 mark since it was up by 1.04% to $30.69 per barrel during the forex session.

This was likely because of profit-taking, but it may have also been a reaction to the release of OPEC’s Monthly Oil Market Report during the session. The report stated that OPEC expects that non-member countries will be forced to cut back on oil production by 660,000 barrels per day in 2016 due to the continuing slump in oil prices. And this would help to bring balance to the force, er, I mean the oil glut.

Signs of risk-taking? – Despite a gloomy start to the week in the Asian equities market, European market players were in a more upbeat mood during the morning London trading session since the pan-European FTSEurofirst 300 was up by 0.44% to 1,302.76 while the DAX was up by 0.24% to 9,565.00. U.S. equity futures were also getting some love due to the risk-on sentiment, with the S&P 500 futures up by 0.27% to 1,879.25 and the Nasdaq futures up by 0.34% to 4,153.00 during the forex session.

The catalysts for the return of risk appetite were a bit elusive, though. It could have been due to the moderate recovery in oil prices during the session, although it’s also possible that European market players were happy that the Shanghai Composite Index closed 0.47% higher to 2,913.84 for the day. It’s also possible that risk sentiment improved because of the stronger yuan brought about by China’s new anti-speculation measures. It could even have been due to an exclusive report from Reuters regarding the resignation of China’s chief securities regulator during the session. Some market analysts were attributing the demand for European equities to individual companies, however. Of course, it could also just be plain and simple profit-taking.

Major Currency Movers:

JPY – The return of risk appetite was bad news for the safe-haven yen, so some forex traders probably used the opportunity to take some delicious profits off the table. However, some market analysts were attributing the yen’s weakness to the stronger yuan because of China’s new anti-speculation measures which I mentioned earlier.

USD/JPY was up by 31 pips (+0.27%) to 117.35, CAD/JPY was up by 45 pips (+0.56%) to 80.93, EUR/JPY was up by 36 pips (+0.29%) to 127.84

CAD – The recovery in oil prices meant that the Loonie was recovering, too. The Loonie was giving the safe-havens (USD, JPY, CHF) their comeuppance, but interestingly enough, the Loonie’s strength was more pronounced against its fellow high-yielding comdolls (NZD, AUD). Now that I think about it, Aussie and Kiwi pairs were mostly range-bound during the forex session, probably because forex traders were avoiding the two currencies because of the close trade relations of their respective economies to China and given the upcoming Q4 2015 GDP report for China tomorrow.

USD/CAD was down by 42 pips (-0.29%) to 1.4497, NZD/CAD was down by 31 pips (-0.33%) to 0.9362, AUD/CAD was down by 35 pips (-0.35%) to 0.9984

Watch Out For:

  • U.S. banks will be observing Martin Luther King Jr. Day, so expect liquidity to dry up during the U.S. session

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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