London Session Forex Recap – Mar. 18, 2016

  • German PPI m/m: -0.5% vs. -0.1% expected, -0.7% previous
  • German PPI y/y: -3.0% vs. -2.6% expected, -2.4% previous
  • Euro Zone labor cost index y/y: 1.3 vs. 1.1 previous
  • Euro Zone wage growth y/y: 1.5% vs. 1.5% previous
  • Canadian retail sales and CPI readings coming up

Forex price action during today’s morning London session was rather choppy, but forex traders were likely taking most of their cues from the prevailing risk-on sentiment. The Kiwi’s wonky price action seems to be the exception, though.

Major Events:

Oil rallies hard – Oil benchmarks were in full rally mode during the morning London session, with U.S. crude oil up by 2.26% to $41.11 per barrel and Brent crude oil up by 2.07% to $42.40 per barrel. Market analysts attributed the oil rally to seasonal demand, improved outlook due to the upcoming oil freeze meeting, and the relatively weak U.S. dollar.

ECB Praet speaks – ECB Chief Economist Peter Praet said in an interview earlier that the ECB has not yet “reached the physical lower boundary,” and that if “negative shocks should worsen the outlook or if financing conditions should not adjust in the direction and to the extent that is necessary to boost the economy and inflation, a rate reduction remains in our armoury.”

In short, Praet is saying that ECB still has room to cut rates further if needed. This may only be Praet’s own opinion, though, but if he represents the stance of other ECB officials, then Praet’s statement will render moot ECB Draghi’s previous statement that “we [ECB officials] don’t anticipate that it will be necessary to reduce rates further.” There was no noticeable reaction from euro pairs, however.

Moderate risk-taking – There was some risk-taking during the morning London session, likely because of rallying oil prices. The pan-European FTSEurofirst 300 was up by 0.26% to 1,343.46 while the DAX was up by 0.11% to 9,903.00.

The safe-haven gold, meanwhile, was down by 1.06% to $1,251.60 per troy ounce. As for U.S. equity futures, they were in positive territory, with the S&P 500 futures up by 0.22% to 2,034.75 and Nasdaq futures up by 0.14% to 4,399.25.

Major Currency Movers:

CAD – The Loonie was rather strong during the morning London session, thanks to the prevalence of risk appetite and rallying oil prices. It’s also possible that forex traders were opening preemptive positions ahead of top-tier Canadian economic reports for later.

USD/CAD was down by 33 pips (-0.26%) to 1.2974, AUD/CAD was down by 32 pips (-0.33%) to 0.9892, NZD/CAD was down by 49 pips (-0.56%) to 0.8826

JPY – The lower-yielding currencies didn’t do too well during the morning London session, thanks to the prevalence of risk appetite. Among the lower-yielding currencies, the safe-haven yen ended up being the weakest. It was the weakest currency of them all, though.

USD/JPY was up by 11 pips (+0.10%) to 111.44, CHF/JPY was up by 14 pips (+0.12%) to 115.12, CAD/JPY was up by 33 pips (+0.39%) to 85.88

NZD – Despite the risk-on environment, the higher-yielding Kiwi was really weak during the morning London session. Heck, it even lost out to the safe-haven currencies. There were no apparent catalysts for the Kiwi’s slide, however.

NZD/USD was down by 20 pips (-0.29%) to 0.6801, NZD/CHF was down by 26 pips (-0.40%) to 0.6584, NZD/JPY was down by 13 pips (-0.18%) to 75.80

Watch Out For:

  • 1:30 pm GMT: Headline (0.6% expected, -2.2% previous) and core (0.4% expected, -1.6% previous) readings for Canadian retail sales
  • 1:30 pm GMT: Headline (0.4% expected, 0.2% previous) and core (0.5% expected, 0.3% previous) readings for Canada’s CPI
  • 2:00 pm GMT: New York Fed President William Dudley will deliver a speech
  • 3:00 pm GMT: The preliminary result for the University of Michigan’s consumer sentiment survey (92.2 expected, 91.7 previous)
  • 4:00 pm GMT: Boston Fed President Eric Rosengren will participate in a panel discussion
  • 7:00 pm GMT: St. Louis Fed President James Bullard is scheduled to speak

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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