London Session Forex Recap – Mar. 3, 2016

  • U.K. nationwide HPI m/m: 0.3% vs. 0.4% expected, 0.3% previous
  • U.K. Halifax HPI m/m: -1.4% vs. 0.0% expected, 1.7% previous
  • French final services PMI: downgraded to 49.2 vs. unrevised at 49.8 expected
  • German final services PMI: upgraded to 55.3 vs. 55.1 expected, 53.8 preliminary
  • Euro Zone final services PMI: revised higher to 53.3 vs. steady at 53.0 expected
  • Euro Zone composite PMI: 53.0 vs. unrevised at 52.7 expected
  • U.K. services PMI: 52.7 vs.55.1 expected, 55.6 previous
  • Euro Zone retail trade m/m: 0.4% vs. 0.1% expected, 0.6% previous
  • Euro Zone retail trade y/y: 2.0% vs. 1.3% expected, 2.1% previous

It was a rather subdued morning London forex session for the most part, with the pound, the Aussie, and the Kiwi being the main movers. But there was an injection of volatility for Greenback and Swissy pairs near the end.

Major Events:

U.K. services PMI fail to impress – Business activity in the United Kingdom’s service sector fell to 52.7, which is still above the 50.0 stagnation mark, but the lowest reading since March 2013. According to the PMI report, the weaker increase “mainly reflected a slower expansion in the volume of incoming new business.” Job creation in the service sector also “rose at the the slowest pace in two-and-a-half years.” The only candle in the darkness was that “Average input prices rose in February, linked mainly to salaries.”

Euro Zone services PMI revised higher – The final reading for the euro zone’s services PMI was revised higher from 53.0 to 53.3, but it’s still a bit lower than the previous month’s 53.6 reading and it’s still the lowest reading in just over a year. According to the details of the report, the slower reading (relative to the previous month) was due to “a weaker rate of improvement in new business received.” Employment growth also fell to a four-month low, but all euro zone countries that were surveyed reported higher employment at least.

Risk aversion all around – There was a very noticeable lack of risk-taking during the morning London session, with with the pan-European FTSEurofirst 300 down by 0.32% to 1,337.65 and the DAX down by 0.35% to 9,742.00. U.S. equity futures were also now modestly in the red, with the S&P 500 futures down by 0.11% to 1,981.38 and Nasdaq futures down by 0.09% to 4,325.50 during the morning London session. Gold, the traditional safe-haven, was getting some demand since it was up by 0.26% to $1,245.00 during the session. Regarding the weakness in European equities, market analysts were mainly pointing to disappointing earnings for individual companies.

Major Currency Movers:

GBP – The pound started the forex session by dropping across the board. The drop wasn’t due to the poor monthly reading for the Halifax HPI, though, since that came out earlier. It’s possible that forex traders were betting that U.K. services PMI was gonna be less-than-expected after both construction and manufacturing PMI failed to meet market expectations.

This is reinforced by the fact that pound pairs kept encountering buyers when the disappointing PMI report was released. After that, the pound’s forex price action diverged as it got dragged around by opposing currencies, but the pound ended the session on sour note for the most part.

GBP/USD was down by 11 pips (-0.08%) to 1.4089, GBP/AUD was down by 80 pips (-0.42%) to 1.9182, GBP/CHF was down by 55 pips (-0.39%) to 1.4014

CHF – It’s natural to expect some safe-haven flows given the risk-off sentiment during the morning London session. And it seems like the Swissy was the safe-haven of choice for most forex traders since it managed to beat up its fellow safe-havens.

USD/CHF was down by 32 pips (-0.33%) to 0.9945, CAD/CHF was down by 19 pips (-0.27%) to 0.7409, CHF/JPY was up by 12 pips (+0.10%) to 114.49

USD – Like the Swissy, the Greenback is also considered a safe-haven currency, but it was rather weak during the morning London session. There weren’t any major catalysts for the Greenback, so it was most likely just preemptive positioning/liquidation before ISM’s non-manufacturing PMI for later.

USD/CAD was down by 11 pips (-0.08%) to 1.3417, USD/JPY was down by 25 pips (-0.22%) to 113.86, EUR/USD was up by 35 pips (+0.32%) to 1.0904

AUD & NZD – The Aussie and the Kiwi are both higher-yielding comdolls, so it’s kinda weird that they were both grinding higher for the most part. It likely had to do with rising commodities during the morning London session. The Kiwi and Aussie are comdolls after all.

AUD/USD was up by 26 pips (+0.36%) to 0.7345, AUD/CAD was up by 28 pips (+0.28%) to 0.9856

NZD/USD was up by 32 pips (+0.48%) to 0.6716, NZD/JPY was up by 19 pips (+0.26%) to 76.48

Watch Out For:

  • 1:30 pm GMT: U.S. initial jobless claims (270K expected, 272K previous)
  • 1:30 pm GMT: U.S. revised non-farm productivity (no revision from -3.0% expected)
  • 2:45 pm GMT: U.S. Markit’s final services PMI (unrevised at 49.8 expected)
  • 3:00 pm GMT: U.S. factory orders (2.1% expected, -2.9% previous)
  • 3:00 pm GMT: U.S. ISM non-manufacturing PMI (53.0 expected, 53.5 previous)
  • 5:45 pm GMT: BOE Chief Economist Andy Haldane is scheduled to speak

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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