London Session Forex Recap – Mar. 11, 2016

  • German WPI m/m: -0.5% vs. -0.4% previous
  • German WPI y/y: -1.9% vs. -1.0% previous
  • German final HICP m/m: unrevised at 0.4% as expected
  • German final HICP y/y: unrevised at -0.2% as expected
  • Italian industrial production m/m: 1.9% vs. 0.9% expected, -0.6% previous
  • U.K. trade balance: -£2.20B vs. -£2.65B expected, -£3.02B previous
  • U.K. construction output m/m: -0.2% vs. 0.2% expected, 2.1% previous
  • U.K. construction output y/y: -0.8% vs. -1.7% expected, 1.6% previous

Today’s morning London forex session was rather subdued, with most currency pairs bound in tight ranges or moving at a grinding a pace. Euro and pound pairs were on the move, though.

Major Events:

Commodities rally – Commodities moved higher during Friday’s morning London session. Base metals were mostly up, with copper up by 0.72% to $2.236 per pound. Oil benchmarks were also in the green during the morning London session, with U.S. crude oil up by 2.27% to $38.70 per barrel and Brent blend crude up by 1.62% to $40.70 per barrel.

Market analysts attributed the broad-based commodities rally to a weakened U.S. dollar (courtesy of yesterday’s ECB decision), as highlighted by the Chinese yuan hitting 2016 highs. For the newbies out there who may be puzzled as to how the Greenback is related to commodities, just know that globally-traded commodities are prices in U.S. dollars, so if the Greenback weakens, then that means that commodities are relatively cheaper, which attracts bargain hunters.

Upbeat mood to end the week – ECB Draghi hinted that further easing is unlikely during yesterday’s ECB press conference, which was a real joy killer that resulted in a sudden and crushing return of risk aversion during yesterday’s U.S. session.

However, everything seems A-okay during today’s morning London session since the pan-European FTSEurofirst 300 was up by a very solid 2.49% to 1,344.45, and the same can be said for the DAX, which was up by a very healthy 2.84% to 9,768.00. U.S. equity futures were also in positive territory during the session, with the S&P 500 futures up by 0.93% to 2,007.25 and the Nasdaq futures up by 1.11% to 4,332.50.

The risk-on sentiment was likely due to the commodities rally since market analysts noted that commodities-related companies were leading the way.

Major Currency Movers:

EUR – The risk-taking during the session was most unkind to the euro, causing it to slid ever lower against its forex rivals throughout the course of session. It’s also possible that the euro’s overall weakness was due to profit-taking after yesterday’s monster moves. It’s a Friday after all, and some forex traders probably wanna avoid weekend risk.

EUR/USD was down by 46 pips (-0.41%) to 1.1098, EUR/GBP was down by 50 pips (-0.65%) to 0.7764, EUR/CHF was down by 40 pips (-0.37%) to 1.0949

CAD – The Loonie started the morning London on a very strong footing, thanks to rising oil prices. However, the Loonie got sold off across the board about halfway through the morning London session. There weren’t any major catalysts for the sudden change in sentiment on the Loonie, but it’s possible that forex traders were just liquidating their Loonie longs ahead of Canada’s jobs report for later. Oh, if you’re planning to trade that event, make sure to read up on Forex Gump’s preview here.

USD/CAD was down by 6 pips (-0.05%) to 1.3254 with 1.3232 as session low, AUD/CAD was up by 4 pips (+0.04%) to 0.9950 with 0.9913 as session low, GBP/CAD was up by 35 pips (+0.18%) to 1.8944 with 1.8896 as session low

GBP – Despite the broad-based commodities rally and the prevalence of risk appetite during the session, most Aussie pairs only climbed higher at a grinding pace while the Kiwi traded sideways. And I already discussed the Loonie’s forex price action. The only major higher-yielding currency left is the pound, and it was certainly getting all the love from risk-takers since it managed to beat out all its forex rivals.

GBP/USD was up by 31 pips (+0.22%) to 1.4291, GBP/JPY was up by 51 pips (+0.31%) to 162.66, GBP/CHF was up by 39 pips (+0.28%) to 1.4099

Watch Out For:

  • 1:30 pm GMT: Canadian jobless rate (steady at 7.2% expected)
  • 1:30 pm GMT: Canadian employment change (10.0K expected, -5.7K previous)
  • 1:30 pm GMT: U.S. import price index (-0.7% expected, -1.1% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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