- German preliminary Q4 GDP q/q: 0.3% as expected, same as previous
- German preliminary Q4 GDP y/y: 1.3% vs. 1.4% expected, 1.7% previous
- German WPI m/m: -0.4% vs. 0.2% expected, -0.8% previous
- U.K. construction output m/m: 1.5% vs 2.1% expected, -1.1% previous
- Euro Zone industrial production m/m: -1.0% vs. 0.3% expected, -0.5% previous
- Euro Zone industrial production y/y: -1.3% vs. 0.7% expected, 1.4% previous
- Euro Zone preliminary Q4 GDP q/q: 0.3% as expected, same as previous
- Euro Zone preliminary Q4 GDP y/y: 1.5% as expected vs. 1.6% previous
Price action was a bit more subdued than usual during today’s morning London forex session, but there was more than enough volatility and directional movement to keep the session interesting.
Euro Zone preliminary Q4 2015 GDP – Euro zone Q4 2015 GDP grew by 0.3% quarter-on-quarter and 1.5% year-on-year, which are both within expectations. However, the year-on-year reading was slightly slower than the previous quarter’s 1.6% expansion. Unfortunately, there was no breakdown of the GDP components, but we did get a separate report for…
Euro Zone industrial production – Industrial output in the euro zone for the December period was a disappointment since the month-on-month reading printed a 1.0% contraction instead of advancing by 0.3% while the year-on-year reading was down by 1.3% instead of increasing by 0.7% as expected. The year-on-year contraction is rather significant since this is the first time in about a year that industrial production was pushed into the red.
According to the details of the report, the unexpected month-on-month decline was due mainly to a 2.4% fall in energy production, and a 1.9% contraction in capital goods production. The two aforementioned components were also the main drags to the year-on-year reading, with energy production down by 7.3% and capital goods production down by 2.6%.
Commodities rally – Commodities were rallying hard during the forex session, with oil leading the charge. The broad-based rally was likely due to profit-taking from the shorts after an entire week of declines. In the case of oil, however, market analysts also pointed to renewed speculation on a potential deal to cut back on oil production after United Arab Emirates Energy Minister Suhail bin Mohammed al-Mazrouei discussed the possibility of such a deal earlier. U.S. crude oil was up by 4.41% to $27.37 per barrel while Brent crude oil was up by 4.29% to $31.35 per barrel during the session.
Returning risk appetite or profit-taking? – Commodities were not the only ones in rally mode since European equities were raking-in gains as well, the pan-European FTSEurofirst 300 up by 2.07% to 1,220.50 and the DAX up by 1.75% to 8,906.00. U.S. equity futures were glowing green as well, with the S&P 500 futures up by 1.10% to 1,844.50 and the Nasdaq futures 1.04% to 4,002.50 during the trading session.
Some market analysts attributed the risk-taking to good company earnings reports, particularly for banks. Other analysts, meanwhile, were pointing to the commodities rally that I mentioned earlier. Profit-taking after global equities slumped hard during the week isn’t off the table, though, but it’s possible that risk appetite was genuinely making a comeback since gold was down by 0.79% to $1,237.90 per troy ounce during the session.
Major Currency Movers:
GBP – The returning risk appetite allowed the higher-yielding pound to easily trump ALL its forex rivals, including the higher-yielding comdolls.
GBP/USD was up by 18 pips (+0.13%) to 1.4513, GBP/NZD was up by 47 pips (+0.22%) to 2.1817, GBP/JPY was up by 101 pips (+0.62%) to 163.58
JPY – As the go-to currency during times of risk aversion, the Japanese yen had a reversal of fortune because of the risk-on sentiment, and ended up being the weakest currency of them all.
USD/JPY was up by 53 pips (+0.48%) to 112.70, EUR/JPY was up by 38 pips (+0.30%) to 127.01, CHF/JPY was up by 63 pips (+0.55%) to 115.58
EUR – The lower-yielding euro was also feeling the burn from the risk-on environment, as market players switched to riskier assets such as European equities. Although it’s also possible that forex traders were pricing in the rather disappointing industrial production readings.
EUR/USD was down by 11 pips (-0.10%) to 1.1267, EUR/GBP was down by 23 pips (-0.30%) to 0.7762, EUR/CHF was down by 27 pips (-0.25%) to 1.0987
- 1:30 pm GMT: U.S. import price index (-1.5% expected, -1.2% previous)
- 1:30 pm GMT: U.S. headline (0.1% expected, 0.1% previous) and core (0.1% expected, -0.1% previous) readings for U.S. retail sales; check out Forex Gump’s Forex Trading Guide here
- 3:00 pm GMT: The preliminary result for the University of Michigan’s consumer sentiment survey (92.6 expected, 92.0 previous)
- 3:00 pm GMT: U.S. business inventories (0.1% expected, -0.2% previous)
- 3:00 pm GMT: New York Fed President William Dudley has a speech
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
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