London Session Forex Recap – Apr. 4, 2016

  • U.K. construction PMI: 54.2 vs. 54.1 expected, 54.2 previous
  • Euro Zone Sentix investor confidence: 5.7 vs. 7.0 expected, 5.5 previous
  • Euro Zone unemployment: 10.3% as expected, 10.4% previous
  • Euro Zone PPI m/m: -0.7% vs. -0.6% expected, -1.1% previous
  • Euro Zone PPI y/y: -4.2% vs. -4.0% expected, -3.0% previous

Forex price action was a bit wonky during Monday’s morning London session, but there was enough volatility and directional movement to keep the session interesting.

Major Events/Reports:

Oil rebounds – Oil benchmarks was deep in the red when the morning London session rolled around, but bounced back (and then some) when news began to spread around that Iran will be joining the oil freeze meeting in Doha on April 17, but that it will only agree to an oil output freeze once its oil output reaches 4 million barrels per day, according to Russian Energy Minister Alexander Novak.

U.S. crude oil was up by 0.41% to $36.94 per barrel during the morning London session while Brent blend crude oil was up by 0.49% to $38.86 per barrel.

ECB Praet speaks – ECB Chief Economist and Executive Board Member Peter Praet gave a statement during an event in Rome today. Specifically, he said that “The prolonged period of low inflation we are in today has increased the risks that inflation misses might become persistent, which would be deeply damaging for the economy” and “This is why we have reacted so forcefully to secure our objective – and will continue to do so in the future if necessary.” In other words, the ECB can still do more and will do more if necessary, so we can probably expect even more easing if things go south in the euro zone.

U.K. construction PMI – The United Kingdom’s construction PMI reading from Markit/CIPS was unchanged at 54.2 in March. U.K. construction PMI has been above the 50.0 neutral mark for 35 straight months now, but the 54.2 readings for both February and March are the lowest on record since June 13. Commentary from the report noted that residential construction continued to slow down to the weakest level since January 2013, but this was offset by higher civil engineering and commercial construction. In addition, “the rate of employment growth [eased] to its slowest since June 2013.”

Risk-on session – There were signs of risk-taking during the morning London session, with the FTSEurofirst 300 up by 0.86% to 1,317.87 and the DAX up by 1.05% to 9,897.00 while the safe-haven gold was kicked 0.42% lower to $1,218.40 per troy ounce during the session. U.S. equity futures were also printing modest gains, with the S&P 500 futures up by 0.24% to 2,070.00 and the Nasdaq futures up by 0.22% to 4,538.62 during the morning London session.

The risk-on sentiment was likely due to profit-taking after last week’s European equities tumble, but market analysts were also pointing to strong performance from specific sectors and companies. It could have also been due to ECB Praet’s earlier statement about the ECB being able to do more if needed. Also, European equities also saw a noticeable boost when oil benchmarks began to recover during the later half of the morning London session.

Major Currency Movers:

CAD – The Loonie was following oil’s price action, so it started the session on a weak footing against most of its forex rivals, and then began pushing back when oil benchmarks also started climbing higher.

USD/CAD was down by 25 pips (-0.20%) to 1.3036 with 1.3082 as session high, EUR/CAD was down by 29 pips (-0.19%) to 1.4828 with 1.4885 as session high, AUD/CAD was down by 12 pips (-0.12%) to 0.9948 with 0.9966 as session high

GBP – Forex traders tried to sell the pound when the construction PMI reading from Markit/CIPS was released, likely because of the downbeat tone of the reports commentary. However, bullish interests were much stronger and the pound just kept on climbing since, ending the morning London session as the one currency to rule them all. There weren’t any catalyst for the pound’s strength, though, but it’s possible that pound shorts were just taking profits off the table after the pound’s dismal performance last week.

GBP/USD was up by 56 pips (+0.40%) to 1.4268, GBP/NZD was up by 101 pips (+0.49%) to 2.0802, GBP/CHF was up by 55 pips (+0.41%) to 1.3695

NZD – The Kiwi was pretty vulnerable during the morning London session that it even lost out to the safe-haven currencies, even though risk appetite was the prevalent market sentiment. The Kiwi was the best performing currency last week, so perhaps the Kiwi’s broad weakness was due to profit-taking.

NZD/USD was down by 10 pips (-0.15%) to 0.6855, NZD/CHF was down by 7 pips (-0.11%) to 0.6581, NZD/CAD was down by 27 pips (-0.31%) to 0.8939

Watch Out For:

  • 3:00 pm GMT: U.S. factory orders (-1.8% expected, 1.5% previous)
  • 3:00 pm GMT: BOC Governor Stephen Poloz will give a little speech
  • 3:00 pm GMT: U.S. labor market conditions index (-2.4% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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