London Session Forex Recap – Mar. 2, 2016

  • Swiss GDP q/q: 0.4% vs. 0.2% expected, -0.1% previous
  • Spanish unemployment change: 2.2K vs. 0.2K expected, 57.2K previous
  • U.K. Construction PMI: 54.2 vs. 55.5 expected, 55.0 previous
  • Euro Zone PPI m/m: -1.0% as expected vs. -0.8% previous
  • Euro Zone PPI y/y: -2.9% as expected vs. -3.0% previous

Ho-hum. Today was another relatively quiet morning London forex session, with most currency pairs happily milling about in tight ranges. The only breaker of the peace was the pound, although the euro was somewhat misbehaving as well.

Major Events:

Disappointing U.K. construction PMI – The construction PMI report from Markit/CIPS failed to meet market expectations by U.K. dropping to a 10-month low of 54.2 instead of rising to 55.5.

According to the PMI report, “housing activity was the slowest recorded since June 2013” and “Growth of commercial building work also moderated” to “the softest since the election-related slowdown in May 2015.” As a result, job creation suffered, with jobs growth rising at the slowest rate on record since August 2013.

ECB Coeuré’s speech – ECB Executive Board Member Benoît Coeuré delivered a speech earlier wherein he admitted that “Earnings among euro area banks continue to be weak” due to the ECB’s policies. Although he was quick to add that “many banks have been able to more than offset declining interest revenues with higher lending volumes, lower interest expenses, lower risk provisioning and capital gains.”

Perhaps of more importance to euro traders was his statement that the euro zone “urgently needs higher growth to bring down high unemployment, to deleverage the economy and to raise inflation back to our price stability objective.” That probably made forex traders think about the next week’s ECB meeting and rate decision.

Oil in the red again – Oil benchmarks were in negative territory during the morning London session, thanks to U.S. crude oil inventories rising to record highs, according to market analysts. This effectively countered optimism over an upcoming meeting to limit oil output.

U.S. crude oil was now down 1.95% to $33.73 per barrel after reaching an intraday high of $34.28 earlier. Brent crude oil, meanwhile, was down by 1.01% to $36.44 per barrel during the morning London session after getting as high as $36.98 earlier.

Risk aversion making a comeback? – Risk aversion slowly gripped the hearts of European market players during today’s morning London session, likely because of retreating oil prices.

The pan-European FTSEurofirst 300 was still up by 0.24% to 1,336.10 during the morning London session, but it’s already off its highs at 1,343.72. The DAX was also still up by 0.37% to 9,752.80, but it has been making its way down after reaching 9,838.00 earlier.

U.S. equity futures were also flashing red, with the S&P 500 futures down by 0.28% to 1,972.50 while Nasdaq futures was down by 0.21% to 4,328.50. As for  the safe-haven gold, it was pushed 0.15% higher to $1,232.60 after spending most of the Asian session in the red.

Major Currency Movers:

GBP – The pound had another repeat performance during today’s morning London forex session. It dropped quickly across the board when the construction PMI failed to impress only to rally hard later on, even though there weren’t any discernible catalysts for the rally.

GBP/USD was up by 34 pips (+0.25%) to 1.4013 with 1.3914 as session low, GBP/CAD was up by 42 pips (+0.23%) to 1.8842 with 1.8728 as session low, GBP/CHF was up by 33 pips (+0.24%) to 1.3997 with 1.3887 as session low

EUR – The euro was slightly but broadly higher during the early part of the morning London session, likely due to the returning risk-off sentiment. However, euro pairs quickly went south after ECB Coeuré’s little speech.

Hmm. The euro declined around the same time that the pound was climbing higher. Perhaps capital was flowing from the euro to the pound. Still no clear catalyst for pound demand, though.

EUR/USD was down by 5 pips (-0.05%) to 1.0855 with 1.0876 as session high, EUR/GBP was down by 22 pips (-0.28%) to 0.7745 with 0.7813 as session high, EUR/AUD was down by 26 pips (-0.18%) to 1.5014 with 1.5080 as session high

Watch Out For:

  • 1:15 pm GMT: ADP U.S. employment survey (190K expected, 205K previous)
  • 2:00 pm GMT: BOE Deputy Governor Jon Cunliffe will testify before the Lord’s Committee
  • 3:30 pm GMT: U.S. crude oil inventories (2.5M expected, 3.5M previous)
  • 7:00 pm GMT: U.S. Fed Beige Book will be released
  • 10:30 pm GMT: AIG Australian services index (48.4 previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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