London Session Forex Recap – Feb. 9, 2016

  • Swiss jobless rate: 3.4% vs. 3.5% expected, 3.4% previous
  • German current account: €25.6B vs. €26.7B expected, €24.3B previous
  • German trade balance: €18.8B vs. €20.0B expected, €20.5B previous
  • German industrial production m/m: -1.2% vs. 0.5% expected, -0.1% previous
  • German industrial production y/y: -2.2% vs. -0.5% expected, 0.1% previous
  • U.K. trade balance: -£9.92B vs. -£10.40B expected, -£11.5B previous
  • U.S. NFIB small business index: 93.9 vs. 94.6 expected, 95.2 previous

The forex calendar for today’s morning London trading session only had low and mid-tier items on tap, so forex traders turned to European equities, oil, and overall risk sentiment for direction.

Major Events:

IEA says OPEC deal unlikely – The International Energy Agency (IEA) released a report during the trading session, and it wasn’t really that upbeat. In the report, the IEA stressed that “Persistent speculation about a deal between OPEC and leading non-OPEC producers to cut output appears to be just that: speculation.”

The report also stated that “It is OPEC’s business whether or not it makes output cuts either alone or in concert with other producers but the likelihood of coordinated cuts is very low.” Moreover, the report warned that “Supply and demand data for the second half of the year suggests more stock building, this time by 0.3 million bpd. If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term. In these conditions the short-term risk to the downside has increased.”

Market players didn’t like the report too well since the oil rally was quickly capped and oil benchmarks began shedding some of their gains. U.S. crude oil was still up by 0.66% to $29.88 per barrel after reaching a high of $30.61 earlier. Brent crude oil, meanwhile, was up by 0.30% to $32.98 per barrel after touching $33.56 earlier.

Gloomy Tuesday – The gloomy mood from the earlier Asian session carried over into the morning London session, with the DAX down by 1.17% to 8,874.50 and the pan-European FTSEurofirst 300 down by 1.22% to 1,224.59. Ouch! Even U.S. equity futures were infected by the persistent risk aversion, with the S&P 500 futures down by 0.42% to 1,844.25 and the Nasdaq futures down by 0.44% to 3,946.88 during the forex session

Most market analysts attributed the prevailing risk-off sentiment to the large slump in Asian equities earlier. Some market analysts noted that banking stocks were leading the dive, however. Could it be that market players are finally considering the possibility that we are now in a bear market? In any case, the doom and gloom sentiment intensified when oil began to give back its gains shortly after the IEA report that I mentioned earlier.

Major Currency Movers:

EUR – As I noted in last week’s Forex Top Market Movers, the euro has recently been behaving like a safe-haven, especially during the European trading session. Well, today was another risk-off day, so demand for the euro was once again high despite the disappointing reading for Germany’s industrial production. Heck, demand for the euro was so strong that only the safe-haven Swissy was able to win out against the mighty euro.

EUR/USD was up by 47 pips (+0.42%) to 1.1229, EUR/AUD was up by 210 pips (+1.33%) to 1.6063, EUR/NZD was up by 161 pips (+0.95%) to 1.7070

CHF – The gloomy mood that prevailed during the trading session meant that forex traders were fleeing en masse to the safe-haven currencies (CHF, USD, JPY). Interestingly enough, the Swissy was the safe-haven of choice for most forex traders during the session instead of the Japanese yen.

Demand for the yen was probably tempered by earlier reports that Masatsugu Asakawa, Japan’s so-called financial diplomat, is checking for yen volatility. It’s also possible that forex traders were a bit wary of the yen because of Japanese Finance Minister Taro Aso’s comment that the yen’s recent moves have been “rough” and worthy of observing.

USD/CHF was down by 59 pips (-0.60%) to 0.9795, EUR/CHF was down by 22 pips (-0.20%) to 1.0998, AUD/CHF was down by 104 pips (-1.51%) to 0.6846

AUD – The higher-yielding Aussie was the weakest currency of them all during the morning London session, so much so that it even lost out to it’s fellow comdolls. There weren’t any catalysts that can account for the severe Aussie weakness, however, but it’s possible that European forex traders were pricing-in the disappointing reports that I mentioned during the Asian session forex recap.

AUD/USD was down by 62 pips (-0.89%) to 0.6989, AUD/NZD was down by 41 pips (-0.38%) to 1.0625, AUD/CAD was down by 92 pips (-0.94%) to 0.9726

Watch Out For:

  • 3:00 pm GMT: JOLTS U.S. job openings (5.41M expected, 5.43M previous)
  • 3:00 pm GMT: U.S. wholesale inventories (-0.1% expected, -0.3% previous)
  • 9:45 pm GMT: New Zealand’s retail card spending (0.3% expected, -0.2% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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