London Session Forex Recap – Jan. 21, 2016

  • French INSEE manufacturing confidence: 102 vs. 103 expected, 102 previous
  • ECB maintains refinancing rate at 0.05% as expected
  • ECB maintains marginal lending rate at 0.30% as expected
  • ECB maintains deposit rate at -0.30% as expected
  • ECB press conference coming up

The ECB kept rates on hold as expected, so most euro pairs remained range-bound during the morning London forex session. Other currency pairs were on the move, though.

Major Events:

ECB rate decision and statement – As expected, the ECB decided to maintain the current rates. As a result, most euro pairs barely budged and continued milling about in tight ranges, as forex traders waited for the ECB press conference (watch it live here). If you wanna trade this event, but you’re not sure what to focus on during the press conference, then check out Forex Gump’s write-up for the event here.

Brexit jitters weigh on the pound – With David Cameron ready to grab the mic in Davos in order to argue against a potential Brexit, and various European leaders giving out sound bites on how horrible it would be for the U.K. and the Euro Zone if a Brexit does occur, it’s no wonder why forex traders began thinking about the possible ramifications of a Brexit, too.

Oil goes back down – The oil rally sputtered to a standstill and began doubling back when the European forex session rolled in, with U.S. crude oil down by 1.43% to 27.95 per barrel and Brent crude oil down by 0.95% to $27.62 after spending some time above the $28 mark earlier. As usual, most market analysts were pointing their finger to oversupply fears and lower demand from China.

European equities slightly up – Despite the slump in oil prices, European equities were slightly in the green, the pan-European FTSEurofirst 300 up by 0.48% to 1,273.76 and the DAX up by 0.48& to 9,436.30 during the forex session, which implied modest appetite for risk ahead of the ECB press conference.

Major Currency Movers:

CAD – Loonie pairs were pretty strong during the forex session. But other than the risk-on sentiment, there wasn’t really any other catalysts for the Loonie’s strength. It gets even more weird when you consider that oil prices were tumbling down again during the trading session. Although it’s possible that European forex traders were pricing-in the BOC’s decision to maintain rates yesterday.

USD/CAD was down by 53 pips (-0.38%) to 1.4459, NZD/CAD was down by 36 pips (-0.39%) to 0.9290, GBP/CAD was down by 158 pips (-0.77%) to 2.0403

AUD – The Aussie was feeling the love from forex traders, thanks to the prevailing risk-on sentiment during the morning London session. Although the earlier 352.5 billion yuan infusion into the Chinese banking system probably helped as well.

AUD/USD was up by 27 pips (+0.40%) to 0.6915, AUD/NZD was up by 36 pips (+0.33%) to 1.0753, AUD/JPY was up by 53 pips (+0.66%) to 80.95

GBP – The pound was weak across the board during the forex session. Aside from Brexit fears, there were no apparent catalysts for the weakness, however.

GBP/USD was down by 70 pips (-0.50%) to 1.4110, GBP/JPY was down by 39 pips (-0.24%) to 165.01, GBP/AUD was down by 143 pips (-0.70%) to 2.0423

CHF – Swissy pairs were pretty weak for most of the forex session, likely because of the modest amounts of risk-taking during the session. However, demand for the Swissy noticeably picked up shortly after the ECB announced that it kept rates on hold. The sudden demand for the safe-haven Swissy was likely because of the uncertainty that the ECB press conference holds.

USD/CHF was up by 13 pips (+0.14%) to 1.0045 with 1.0077 as session high, EUR/CHF was up by 10 pips (+0.09%) to 1.0950 with 1.0969 as session high, AUD/CHF was up by 30 pips (+0.45%) to 0.6940 with 0.6971 as session high

Watch Out For:

  • 1:30 pm GMT: ECB press conference
  • 1:30 pm GMT: Philadelphia Fed survey (-5.0 expected, -5.9 previous)
  • 1:30 pm GMT: U.S. initial jobless claims (287K expected, 284K previous)
  • 3:00 pm GMT: Euro Zone consumer sentiment (expected to remain unchanged at -5.7)
  • 4:00 pm GMT: U.S. crude oil inventories (3.3M expected, 0.2M previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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