London Session Forex Recap – Mar. 31, 2016

  • German retail sales m/m: -0.4% vs. 0.4% expected, -0.1% previous
  • German unemployment change: 0K vs. -6K expected, -9k previous
  • U.K. current account: -£32.7B vs. -£21.2B expected, -£20.1B previous
  • U.K. net consumer credit: £1.3B as expected v.s £1.6B previous
  • U.K. mortgage approvals: 73.9k vs. 73.5K expected, 74.1K previous
  • U.K. final Q4 GDP q/q: revised higher to 0.6% vs. unchanged at 0.5% expected
  • U.K. final Q4 GDP y/y: revised higher to 2.1% vs. unvhanged at 1.9% expected
  • Euro Zone flash HICP y/y: -0.1% as expected vs. -0.2% previous
  • Euro Zone flash core HICP y/y: 1.0% vs. 0.9% expected, 0.8% previous
  • Canada’s GDP estimate coming up
  • FOMC Dudley will deliver a speech later

Forex price action was a bit choppy during today’s morning London session, with many currency pairs bound in tight ranges. The only clear movers were the Greenback and the yen, and they were both weak.

Major Events/Reports:

Mixed U.K. reports – The U.K. printed a current account deficit of £32.7B for Q4, which is much bigger than the £21.2B deficit that was expected. It’s also bigger than the previous quarter’s £20.1B deficit. The wider-than-expected deficit also equated to around 7% of gross GDP at current market prices, which is “the largest proportion since quarterly records began in 1955,” according to the report from the Office for National Statistics.

Moving on, the final estimate for the United Kingdom’s Q4 2015 GDP was revised higher to 0.6% quarter-on-quarter (0.5% unrevised), which is a tad faster than Q3’s 0.4% expansion. The year-on-year reading was also revised higher to 2.1% from 1.9%, which is the same pace printed back in Q3.

China’s credit rating outlook downgraded – According to a Bloomberg report, Standad & Poor’s downgraded the outlook for China’s credit rating from “stable” to “negative” earlier during the session, but maintained China’s AA- rating, saying that “the nation’s economic rebalancing is likely to proceed more slowly” than expected. The ratings firm also believes that “the economic and financial risks to the Chinese government’s creditworthiness are gradually increasing,” but China’s economy is still projected to grow by around 6% per year in the next three years.

Skittish risk sentiment – There were signs of risk aversion during today’s morning London session, with the pan-European FTSEurofirst 300 down by 0.84% to 1,328.66 and the DAX down by 0.52% to 9,994.00 while the safe-haven gold was up by 0.69% to $1,237.10 per troy ounce. U.S. equity futures also dipped very slightly into the red, with the S&P 500 futures down by 0.04% to 2,054.50 and Nasdaq futures down by 0.06% to 4,479.38 during the morning London session.

The lack of risk-taking was apparently due to a mix of profit-taking from yesterday’s equities rally and end-of-the-month flows, according to market analysts. Although China’s credit rating cut was also probably weighing down the markets.

Major Currency Movers:

USD & JPY – Forex price action was rather wonky during the morning London session since only the Greenback and the yen were really on the move. All other currencies were either dormant or had a mixed performance. There weren’t any apparent catalysts for the yen and the Greenback’s weakness, though. And the two currencies are considered safe-havens, so they should have been getting some demand due to the risk-off sentiment. Might just be another weird session because of end-of-month capital flows.

AUD/USD was up by 44 pips (+0.58%) to 0.7693, EUR/USD was up by 60 pips (+0.56%) to 1.1386, GBP/USD was up by 51 pips (+0.36%) to 1.4393

NZD/JPY was up by 47 pips (+0.62%) to 77.96, CHF/JPY was up by 46 pips (+0.40%) to 116.97, AUD/JPY was up by 42 pips (+0.49%) to 86.39

Watch Out For:

  • 1:30 pm GMT: Canadaian GDP (0.3% expected, 0.2% previous)
  • 1:30 pm GMT: U.S. initial jobless claims (265K expected, same as previous)
  • 2:45 pm GMT: Chicago PMI (50.7 expected, 47.6 previous)
  • 5:30 pm GMT: SNB Governing Board Member Andrea Maechler has a speech
  • 10:00 pm GMT: New York Fed President William Dudley is scheduled to speak

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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