London Session Forex Recap – Apr. 1, 2016

  • U.K. nationwide HPI m/m: 0.8% vs. 0.4% expected, 0.4% previous
  • Swiss retail sales y/y: -0.2% vs. 0.0% expected, -0.1% previous
  • Swiss manufacturing PMI: 53.2 vs. 51.1 expected, 51.6 previous
  • French final manufacturing PMI: unchanged at 49.6 as expected
  • German final manufacturing PMI: revised higher to 50.7 vs. unchanged at 50.4 expected
  • Euro Zone final manufacturing PMI: revised higher to 51.6 vs. unchanged at 51.4 expected
  • U.K. manufacturing PMI: 51.0 vs. 51.2 expected, 50.8 previous
  • NFP report coming up

Today’s another NFP Friday, so volatility was a bit more subdued than normal during today’s morning London forex session. However, currencies were clearly on the move, as forex traders turned mainly to market sentiment for direction.

Major Events/Reports:

Oil sinks – Oil benchmarks were deep in the red during today’s morning London session, with U.S. crude oil down by 2/16% to $37.51 per barrel and Brent blend crude down by 2.13% to $39.47 per barrel.

The slide in oil prices was apparently due to the market’s skepticism on the upcoming oil freeze meeting after Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman said in a Bloomberg interview earlier that Saudi Arabia will only agree to the output freeze deal if Iran and all the other major oil producers do so.

Risk aversion domination – Today’s morning London trading session was another risk-off session, with the pan-European FTSEurofirst 300 down by a painful 2.00% to 1,300.08 and the DAX down by a stinging 2.08% to 9,758.00. The U.S. equity futures were also glowing red, with the S&P 500 futures down by 0.38% to 2,043.75 and the Nasdaq futures down by 0.41% to 4,457.75 during the morning London session.

Aside from pre-NFP jitters and risk sentiment spillover from the gloomy Asian session, market analysts also pointed to slumping energy company shares as the main losers, so declining oil prices were likely a factor as well.

U.K. manufacturing PMI – The United Kingdom’s March manufacturing PMI reading from Markit/CIPS came in at 51.0, which is slightly below the 51.2 consensus reading, but still a slight improvement over the February’s 50.8 reading.

Commentary from the report was a bit less upbeat, though. The pace of manufacturing production, for example, was essentially unchanged from that of February’s seven-month low. Employment also contracted for the third consecutive month while price pressures “remained on the downside,” which is not good news for CPI.

The domestic market was also still the main source of demand since “export business decreased for the third straight month in March.” But the robust domestic demand meant that the performance of the consumer goods sector “remained mildly positive” at least.

NFP Friday! – Today is another NFP Friday, so volatility was naturally a bit more subdued than normal ahead of the NFP report. But that doesn’t mean that currencies were not on the move, however, because there was a lot of noticeable movement. Oh, if you’re planning to trade the NFP report and you need to get up to speed, then you can read Forex Gump’s Forex Preview for the NFP report here.

Major Currency Movers:

EUR – The euro was the one currency to rule them all during the morning London session. There were a slew of Euro Zone PMI readings, but I think the more likely source of the euro’s strength was the squeeze on European equities, which sent capital flows to the lower-yielding euro.

EUR/USD was up by 38 pips (+0.33%) to 1.1418, EUR/CAD was up by 67 pips (+0.45%) to 1.4892, EUR/GBP was up by 59 pips (+0.75%) to 0.7982

CHF – The risk-off vibes during the morning London meant that safe-haven currencies (USD, JPY, CHF) were in demand. The Japanese yen and the Swissy, in particular, were bitterly fighting it out, with the Swissy barely emerging as the victor and the second strongest currency during the session after the mighty euro. The Greenback had a mixed performance, however, probably because forex traders didn’t want to be too exposed ahead of the NFP report.

USD/CHF was down by 23 pips (-0.25%) to 0.9580, AUD/CHF was down by 21 pips (-0.29%) to 0.7348, NZD/CHF was down by 10 pips (-0.16%) to 0.6622

CAD – Declining oil prices and the prevalence of risk aversion during the morning London session were a double whammy for the Loonie.

USD/CAD was up by 13 pips (+0.10%) to 1.3040, NZD/CAD was up by 17 pips (+0.20%) to 0.9014, AUD/CAD was up by 7 pips (+0.07%) to 1.0003

GBP – The pound had a good start when the German market opened, probably because of the better-than-expected reading for the U.K. nationwide HPI. However, the pound’s luck ran out when the London session rolled in. And the pound’s weakness only got worse when the manufacturing PMI reading failed to meet the market’s expectations.

GBP/USD was down by 59 pips (-0.41%) to 1.4305, GBP/JPY was down by 106 pips (-0.66%) to 160.36, GBP/CHF was down by 90 pips (-0.65%) to 1.3705

Watch Out For:

  • 1:30 pm GMT: U.S. non-farm payrolls (202K expected, 242K previous)
  • 1:30 pm GMT: U.S. jobless rate (expected to hold steady at 4.9%)
  • 1:30 pm GMT: U.S. average hourly earnings (0.2% expected, -0.1% previous)
  • 2:30 pm GMT: RBC Canadian manufacturing PMI (49.4 previous)
  • 2:45 pm GMT: Markit’s final U.S. manufacturing PMI (expected to be revised higher from 51.4 to 51.5)
  • 3:00 pm GMT: U.S. construction spending (0.1% expected, 1.5% previous)
  • 3:00 pm GMT: ISM manufacturing PMI (51.0 expected, 49.5 previous)
  • 3:00 pm GMT: Final University of Michigan U.S. consumer sentiment (expected to be revised higher to 90.5 from 90.0)
  • 5:00 pm GMT: Cleveland Fed President Loretta Mester has a speech

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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