London Session Forex Recap – Mar. 7, 2016

  • German factory orders m/m: -0.1% vs. -0.4% expected, -0.2% previous
  • Euro zone Sentix indicator: 5.5 vs. 8.3 expected, 6.0 previous
  • Italian PPI m/m: -0.7% vs. -0.6% previous
  • Italian PPI y/y: -2.5% vs. -3.2% previous
  • Swiss foreign currency reserves: 571B CHF vs. 575B CHF previous

Risk aversion was the name of the game during today’s morning London forex session, but a safe-haven ended up being the weakest currency of them all while a higher-yielder was the strongest. Can you guess which currencies I’m talking about?

Major Events:

Risk appetite fizzles out – The first morning London session of the week started on a rather downbeat note, with the Pan-European FTSEurofirst 300 down by 0.82% to 1,333.63 and the DAX down by 0.94% to 9,732.30.

U.S. equity futures were also pushed into the red, with the S&P 500 futures down by 0.34% to 1,988.25 and the Nasdaq futures down by 0.41% to 4,304.75 during the session. The risk aversion also boosted demand for the safe-haven gold since it was up by 0.20% to $1,273.30 per troy ounce during the morning London session.

This was likely just profit-taking after three consecutive weeks of rallying global equities. Market analysts also pointed to bad news for specific companies, as well as unwinding of positions ahead of the ECB’s monetary policy decision this coming Thursday, as likely catalysts.

Iron ore soars – Iron ore with 62 percent content soared by around 19% to $63.74 per dry metric ton during the morning London session. This is the “biggest gain in daily data going back to 2009,” according to a report from Bloomberg.

Analysts being cited by Bloomberg attributed this to a mix of short covering and a more optimistic outlook after Chinese officials “signaled their willingness to buttress economic growth.”

Analysts were likely referring to an earlier meeting between Chinese President Xi Jinping and lawmakers from China’s Heilongjiang Province wherein they talked about “economic construction,” as reported by Xinhua News.

Major Currency Movers:

AUD – The higher-yielding Aussie was getting mauled by all that risk aversion during the morning London session. But like a revenant, it began to recover from its losses (and then some) when iron ore prices began soaring to record highs, ending the morning London session as the one currency to rule them all.

For the newbie forex traders out there who are puzzled as to what iron ore has to do with the Aussie, just know that iron ore is a major Australian export commodity.

AUD/USD was up by 13 pips (+0.18%) to 0.7420, AUD/JPY was up by 12 pips (+0.14%) to 84.35, AUD/CHF was up by 45 pips (+0.61%) to 0.7427

JPY – The prevalence of risk aversion was good news for the safe-haven currencies, namely the Greenback and the Japanese yen. The yen, in particular, seems to have been the safe-haven of choice for most forex traders.

USD/JPY was down by 6 pips (-0.06%) to 113.65, GBP/JPY was down by 50 pips (-0.31%) to 160.79, EUR/JPY was down by 31 pips (-0.24%) to 124.43

CHF – The Swissy is a safe-haven currency too, but it ended up being the weakest currency of them all during the morning London forex session. There weren’t any apparent catalysts for the Swissy’s broad weakness, however, so I’m gonna point to the usual suspect – the SNB and its policy of weakening the Swissy.

USD/CHF was up by 41 pips (+0.42%) to 1.0001, EUR/CHF was up by 25 pips (+0.23%) to 1.0958, GBP/CHF was up by 24 pips (+0.17%) to 1,.4160

Watch Out For:

  • 3:00 pm GMT: U.S. labor market conditions index (0.4 previous)
  • 6:00 pm GMT: Federal Reserve Governor Stanley Fischer has a speech
  • 6:00 pm GMT: Federal Reserve Governor Lael Brainard is scheduled to speak
  • 8:00 pm GMT: U.S. consumer credit ($16.50B expected, $21.27B previous)
  • 9:45 pm GMT: New Zealand’s manufacturing activity (4.2% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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