London Session Forex Recap – Mar. 23, 2016

  • Swiss ZEW economic expectations: 2.5 vs. -5.9 previous

Forex price action during today’s morning London session was a bit wonky, but it seems like forex traders were turning to risk sentiment for the most part.

Major Events/Reports:

Risk-taking returns to Europe – Security jitters over yesterday’s terror attack seem to have faded away (for now at least) during today’s morning London session, with the pan-European FTSEurofirst 300 up by 0.38% to 1,343.33 and the DAX up by 1.02% to 10,092.00.

U.S. equity futures were also now in positive territory after dipping into the red earlier, with the S&P 500 futures up by 0.06% to 2,043.75 and Nasdaq futures up by 0.07% to 4,437.62 during the morning London session. Aside from fading security jitters, market analysts also pointed to positive reports for specific companies, namely Credit Suisse’s cost cuts.

Commodities crushed – Commodities were broadly in the red during today’s morning London session. The base metal copper was down by 0.15% to $2.286 per pound while the precious metal gold was down by a whopping 1.25% to $1.233.00 per troy ounce. Oil benchmarks were also down, with U.S. crude oil down by 1.04% to $41.02 per barrel and Brent crude oil down by 0.81% to 41.45 per barrel during the session.

The Greenback’s recent strength, due to hawkish comments from Fed officials, was likely the main reason for retreating commodity prices since a stronger Greenback means that commodities are relatively more expensive. Aside from the stronger Greenback, other factors were in play, namely for gold and oil.

Gold was down hard, probably because of the risk-on sentiment while oil benchmarks began to slip after the International Energy Agency (IEA) said earlier that this April’s meeting for an oil freeze deal between and among OPEC and non-OPEC oil producers is “meaningless” and that it’s just “some kind of gesture” to “build confidence that there will be stability in oil prices” given that “only Saudi Arabia has any ability to increase its production.” Other analysts also pointed to a reality check on the oil glut situation, thanks to a higher-than-expected build-up in oil inventories.

Major Currency Movers:

CAD – Despite retreating oil prices, the Loonie was easily the strongest currency during the morning London session. Aside from the risk-on sentiment, European forex traders were probably pricing-in Canada’s annual budget from yesterday, namely the government plans to increase deficit spending by $100 billion in 10 years in order to boost Canada’s economy.

This was touched upon by the BOC in their recent monetary policy statement, as pointed out by Forex Gump. And you can read more about that and what it means for the Loonie here.

USD/CAD was down by 38 pips (-0.29%) to 1.3060, AUD/CAD was down by 26 pips (-0.27%) to 0.9914, EUR/CAD was down by 39 pips (-0.27%) to 1.4617

CHF – The safe-haven Greenback was still pretty strong against most of its forex rivals during today’s morning London session. But the safe-haven Swissy actually trumped the Greenback, even though there were no apparent catalysts for the Swissy’s strength, which is why I said earlier that forex price action was a bit wonky. Anyhow, the Swissy even beat out the higher-yielding comdolls, ending up as the second strongest currency during the morning London session.

USD/CHF was down by 15 pips (-0.15%) to 0.9738, EUR/CHF was down by 16 pips (-0.15%) to 1.0897, NZD/CHF was down by 13 pips (-0.20%) to 0.6537

JPY – The risk-on sentiment was pretty bad for the yen since market players likely abandoned it for higher-yielding currencies and riskier assets like European equities.

USD/JPY was up by 30 pips (+0.27%) to 112.67, CHF/JPY was up by 50 pips (+0.44%) to 115.68, CAD/JPY was up by 47 pips (+0.56%) to 86.25

Watch Out For:

  • 1:40 pm GMT: Deutsche Bundesbank President Jens Weidmann will speak
  • 2:00 pm GMT: St. Louis Fed President James Bullard scheduled for an interview
  • 3:00 pm GMT: SNB quarterly bulletin
  • 3:00 pm GMT: U.S. new home sales (512K expected, 494K previous)
  • 3:30 pm GMT: U.S. crude oil inventories (2.5M expected, 1.3M previous)
  • 10:45 pm GMT: New Zealand’s trade balance ($90M expected, $8M previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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