London Session Forex Recap – Mar. 10, 2016

  • German trade balance: €13.6B vs. €17.0B expected, €19.0B previous
  • German current account: €13.2B vs. €17.0B expected, €26.3B previous
  • French industrial production m/m: 1.3% vs. 0.8% expected, -0.6% previous
  • French industrial production y/y: 2.0% vs. 0.1% expected, -0.2% previous
  • French manufacturing production m/m: 0.8% vs. 0.5% expected, 0.0% previous
  • French manufacturing production y/y: 2.8% vs. 1.3% expected, 0.8% previous
  • ECB cuts refinancing rate to 0.00% vs. maintain at 0.05% expected
  • ECB cuts marginal lending rate to 0.25% vs. maintain at 0.30% expected
  • ECB cuts deposit rate to -0.40% from -0.30% as expected
  • ECB expands QE program from €60B to €80B starting in April 2016
  • ECB will launch a new series of four TLTROs starting in June 2016
  • ECB press conference coming up; watch it live here

The ECB more than delivered on the highly anticipated easing measures during today’s morning London forex session. As a result, forex traders hurled the euro off a cliff. The euro wasn’t the only victim, however, since the Swissy and the Japanese yen were both kicked lower across the board as well.

Major Events:

ECB monetary policy decision – The ECB delivered a substantial stimulus package during the morning London forex session, which is much more than what the market was was hoping for. The following are the easing measures that were introduced straight from the official press release:

  1. The interest rate on the main refinancing operations of the Eurosystem will be decreased by 5 basis points to 0.00%, starting from the operation to be settled on 16 March 2016.
  2. The interest rate on the marginal lending facility will be decreased by 5 basis points to 0.25%, with effect from 16 March 2016.
  3. The interest rate on the deposit facility will be decreased by 10 basis points to -0.40%, with effect from 16 March 2016.
  4. The monthly purchases under the asset purchase programme will be expanded to €80 billion starting in April.
  5. Investment grade euro-denominated bonds issued by non-bank corporations established in the euro area will be included in the list of assets that are eligible for regular purchases.
  6. A new series of four targeted longer-term refinancing operations (TLTRO II), each with a maturity of four years, will be launched, starting in June 2016. Borrowing conditions in these operations can be as low as the interest rate on the deposit facility.

Risk-taking aplenty – Risk appetite was steady ahead of the ECB decision, but it really ramped up once the ECB revealed its stimulus package. Yippee ki-yay!

The Euro Stoxx 50 spiked 3.67% higher to 3,130.00 while the DAX soared by 2.52% to 9,968.20 when it only had a 0.85% gain ahead of the ECB decision. U.S. equity futures were also burning bright green, with the S&P 500 futures up by 1.06% to 2,010.00 while Nasdaq futures were up by 1.22% to 4,346.75 during the morning London session.

The safe-haven gold, meanwhile, was kicked 1.40% lower to $1,239.80 per troy ounce during the morning London session.

Oil dips – Oil was in the red during the morning London session, even though there weren’t really any catalysts. However, some market analysts pointed to seasonal maintenance of oil refineries, which would lower oil demand for for a while.

U.S. crude oil was down by 0.24% to $38.20 per barrel during the morning London session while Brent crude oil was down by 0.85% to $40.72 per barrel.

Major Currency Movers:

EUR – The euro was actually trading sideways for most of the morning London forex session before spiking lower across the board when the ECB announced its monetary policy decision.

EUR/USD was down by 121 pips (-1.10%) to 1.0846, EUR/AUD was down by 202 pips (-1.35%) to 1.4484, EUR/NZD was down by 210 pips (-1.28%) to 1.6257

CHF – The euro wasn’t the only one that got hammered by the ECB decision since the Swissy was pushed off a cliff as well. However, it’s not clear if the euro took the Swissy with it, given the close trade relations between the Euro Zone and Switzerland, or if the SNB deliberately intervened. It’s also entirely possible that forex traders just sold off the safe-haven Swissy due to the risk-on sentiment.

USD/CHF was up by 98 pips (+0.99%) to 1.0071, AUD/CHF was up by 92 pips (+1.23%) to 0.7540, NZD/CHF was up by 75 pips (+1.14%) to 0.6716

JPY – The frantic risk-taking caused by the ECB’s rate decision crushed demand for the safe-haven Japanese yen, causing it to weaken against most of its forex rivals as well.

USD/JPY was up by 55 pips (+0.49%) to 114.15, AUD/JPY was up by 64 pips (+0.76%) to 85.48, NZD/JPY was up by 51 pips (+0.66%) to 76.12

Watch Out For:

  • 1:30 pm GMT: ECB press conferences; watch it live here
  • 1:30 pm GMT: Canadian capacity utilization (81.7% expected, 82.0% previous)
  • 1:30 pm GMT: Canadian NHPI (0.2% expected, 0.1% previous)
  • 1:30 pm GMT: U.S. initial jobless claims (275K expected, 278K previous)
  • 7:00 pm GMT: U.S. Federal budget (-$196.3B expected, $55.2B previous)
  • 9:15 pm GMT: BOC Governor Stephen Poloz is scheduled to speak
  • 9:30 pm GMT: BNZ manufacturing PMI (57.9 previous)
  • 9:45 pm GMT: New Zealand’s FPI (2.0% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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