London Session Forex Recap – Mar. 1, 2016

  • Swiss retail sales: 0.2% vs. 0.0% expected, -1.7% previous
  • Swiss manufacturing PMI: 51.6 vs. 49.7 expected, 50.0 previous
  • French final manufacturing PMI: downgraded to 50.2 vs. steady at 50.3 expected
  • German final manufacturing PMI: upgraded to 50.5 vs. steady at 50.2 expected
  • German unemployment change: -10K as expected vs. -19K previous
  • Euro Zone final manufacturing PMI: upgraded to 51.2 vs. steady at 51.0 expected
  • U.K. manufacturing PMI: 50.8 vs. 52.3 expected, 52.9 previous
  • Euro Zone jobless rate: downtick to 10.3% vs. unchanged at 10.4% expected

Despite plenty of reports, forex price action during today’s morning London forex session was rather subdued, with most currency pairs trading sideways. The only real movers were Aussie and pound pairs, and their price action was actually rather wonky.

Major Events:

Dreadful U.K. manufacturing PMI – The United Kingdom’s manufacturing PMI for February dropped to 50.8, which is a 34-month low and just above the 50.0 stagnation level.

According to the PMI report, production “slumped to a seven-month low, led by sharp decelerations in the consumer and investment goods sector.” In addition, “job losses were registered for the second straight month.” Orders from abroad also “declined for the second straight month.” Moreover, both input costs and output charges continued to slide, which is not exactly good for persistent inflation problem that the U.K. is currently facing.

Rob Dobson, Markit’s Senior Economist, also shared his thoughts by commenting that “The near-stagnation of manufacturing highlights the ongoing fragility of the economic recovery at the start of the year and provides further cover for the Bank of England’s increasingly dovish stance.”

Plenty of risk-taking – Today’s morning London session was all about butterflies and rainbows, with the Pan-European FTSEurofirst 300 up by 1.01% to 1,326.99 and the DAX up by 1.69% to 9,657.00.

U.S. equity futures were also hinting that the upbeat mood may spill over into the U.S. session since the S&P 500 futures was up by 0.84% to 1,945.75 while Nasdaq futures was up by 0.82% to 4,235.50 during the morning London session.

Market analysts attributed the risk-on sentiment to speculation of a possible merger between London Stock Exchange Group and Deutsche Boerse AG, as well as expectations that China would soon be announcing another set of stimulus measures after printing very disappointing PMI readings during the earlier session. Rising oil prices may have been a factor as well.

Major Currency Movers:

GBP – Pound pairs started the morning London session mixed, but were quickly kicked lower across the board when the dreadful readings for manufacturing PMI came up. Strangely enough, the selloff was only very brief and pound pairs began recovering from their losses (and then some).

Analysis on this wonky price action varies. Some analysts think that the pound is already oversold and that the relatively weak pound is gonna be good for the U.K. in the long run. Some say it was due to the risk-on sentiment, but I don’t buy it since other higher-yielding currencies weren’t doing as well.

It’s just my humble opinion, but I think the pound’s forex price action during today’s morning London session was due to the speculation of a potential merger between London Stock Exchange Group and Deutsche Boerse AG that I mentioned earlier. After all, Deutsche Boerse is gonna need a lot of pound sterlings to pull off a merger. Not only that, there were reports floating around that International Exchange, the owner of the New York Stock Exchange, and even the CME Group were rival bidders.

Well, whatever the case may truly be, the fact still remains that the pound was mostly up despite poor data.

GBP/USD was up by 23 pips (+0.17%) to 1.3985, GBP/CAD was up by 51 pips (+0.27%) to 1.8883, GBP/CHF was up by 26 pips (+0.19%) to 1.3963

AUD – Despite the risk-on sentiment, the Aussie was broadly weak during the morning London forex session, even though it finally got some buyers near the end. There weren’t any clear catalysts for the Aussie’s weakness, but it’s possible that European forex traders were just pricing in the disappointing Chinese PMI readings from earlier, although it’s also possible that it was just profit-taking since most Aussie pairs are still up for the day.

AUD/USD was down by 28 pips (-0.40%) to 0.7154 with 0.7133 as session low, AUD/NZD was down by 3 pips (-0.03) to% 1.0834 with 1.0811 as session low, AUD/CAD was down by 26 pips (-0.27%) to 0.9663 with 0.9656 as session low

Watch Out For:

  • 1:30 pm GMT: Canadian GDP (0.1% expected. 0.3% previous)
  • 2:30 pm GMT: RBC Canadian manufacturing PMI (49.3 previous)
  • 2:45 pm GMT: Markit’s final U.S. manufacturing PMI (upgrade to 51.2 from 51.0 expected)
  • 3:00 pm GMT: ISM U.S. manufacturing PMI (48.6 expected, 48.2 previous)
  • 3:00 pm GMT: IBD U.S. consumer optimism (47.8 expected, 47.8 previous)
  • 3:00 pm GMT: U.S. construction spending (0.4% expected, 0.1% previous)
  • Dairy auction currently underway; auction usually ends at around 2:00 pm GMT

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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