London Session Forex Recap – Feb. 11, 2016

  • Swiss CPI m/m: -0.4% as expected, same as previous
  • Swiss CPI y/y: -1.3% as expected, same as previous

Not much on the docket for today’s morning London forex session, but there was volatility aplenty since forex traders turned once again to European equities and overall risk sentiment for direction.

Major Events:

Oil routed – Oil prices were dropping hard during the trading session, with U.S. crude oil down by a whopping 4.03% to $26.34 per barrel and Brent crude oil down by 1.67% to $30.32 per barrel.

Market analysts pointed a slew of catalysts, which included Iran’s earlier offer to sell its oil to Asian markets at discount prices, as well as supply worries over record high U.S. crude inventories among others.

Severe risk aversion during the session – There was much weeping and gnashing of teeth since pretty much every risky asset was showing losses during the forex session. European equities, for instance, were completely routed, with the pan-European FTSEurofirst 300 down by a painful 3.02% to 1,204.05 and the DAX down by a stinging 2.77% to 8,767.80. U.S. equity futures were also heavily bleeding out, with the S&P 500 futures down by 2.11% to 1,807.75 and the Nasdaq futures down by 2.35% to 3,874.12 during the forex session.

Gold, which is the go-to asset during times of uncertainty, was highly in demand, so much so that it was pushed 3.96% higher to $1,241.30 per troy ounce during the session. Bonds were also in very high demand. German 10-year bond yields, for example, got slashed by 42.74% to 0.142% due to the intense demand during the session.

Falling oil prices was likely a factor for the general risk aversion, but market analysts also pointed to poor financial reports from individual companies and worries that banks will have a difficult time in the current low-interest rate environment.

Other analysts, meanwhile, pointed to lower probability of a March rate hike after Fed Head Yellen’s testimony yesterday, which is also related to the low-interest rate environment that’s hurting banks.

BOJ intervention? – Yen pairs mysteriously spiked across the board near the end of the trading session. There were no clear catalysts that could have triggered the spike, but there were rumors of BOJ intervention floating around. These rumors were unsubstantiated (for now), however.

Major Currency Movers:

EUR – The severe risk aversion during the session was putting a squeeze on European equities and the resulting capital outflows was likely benefitting the euro since the euro was winning out against ALL of its forex rivals.

EUR/USD was up by 62 pips (+0.55%) to 1.1342, EUR/GBP was up by 99 pips (+1.28%) to 0.7874, EUR/AUD was up by 153 pips (+0.97%) to 1.6046

GBP – The pound was at the bottom of the hill during the forex session, losing out to ALL its forex rivals. Aside from the prevalence of risk-aversion driving away demand for the higher-yielding pound, there weren’t really any other catalyst for the pound’s severe weakness, however.

GBP/USD was down by 105 pips (-0.73%) to 1.4401, GBP/CAD was down by 127 pips (-0.63%) to 2l0115, GBP/NZD was down by 202 pips (-0.93% ) to2.1588

JPY – The yen had a roller coaster forex price action during the session. It got a lot of buyers at the start of the trading session then traded sideways for the most part before weakening severely and very quickly on the supposed rumors of BOJ intervention.

USD/JPY was down by 55 pips (-0.49%) to 112.17 with 110.96 as session low and 113.15 as session high, AUD/JPY was down by 73 pips (-0.91%) to 79.26 with 77.58 as session low and 79.91 as session high, GBP/JPY was down by 202 pips (-1.24% ) to 161.46 with 159.81 as session low and 163.27 as session high

NZD – The Kiwi’s forex price action was also rather wonky. Like its fellow comdolls, the Kiwi started the session by taking a dive, likely due to the risk-off sentiment. It then parted ways from its fellow comdolls about an hour into the session since Aussie and Loonie either steadied or continued sinking lower while Kiwi pairs began clawing their way higher. No apparent catalysts for the sudden change in sentiment on the Kiwi, though.

NZD/USD was up by 13 pips (+0.20%) to 0.6669 with 0.6585 as session low, NZD/CAD was up by 25 pips (+0.26%) to 0.9314 with 0.9201 as session low, NZD/CHF was up by 10 pips (+0.17%) to 0.6483 with 0.6477 as session low

Watch Out For:

  • 1:30 pm GMT: Canadian house price index (0.2% expected, 0.2% previous)
  • 1:30 pm GMT: U.S. initial jobless claims (280K expected, 285K previous)
  • 3:00 pm GMT: U.S. Fed Chairperson Janet Yellen will testify before the Senate Banking Committee
  • 9:45 pm GMT: New Zealand’s food price index (-0.8% previous)
  • 10:30 pm GMT: RBA Governor Glenn Stevens will testify before the House Representatives’ Standing Committee on Economics

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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