London Session Forex Recap – Apr. 8, 2016

  • Swiss jobless rate: 3.5% vs. 3.6% expected, 3.4% previous
  • German trade balance: €20.3B vs. €18.0B expected, €13.4B previous
  • French manufacturing production m/m: -0.9% vs. -0.3% expected, 0.4% previous
  • French manufacturing production y/y: 1.6% vs. 2.6% expected, 2.4% previous
  • Swiss CPI m/m: 0.3% as expected, 0.2 previous
  • Swiss CPI y/y: -0.9% as expected, -0.8% previous
  • U.K. trade in goods balance: -£11.96B vs. -£10.50B expected, -£12.16B previous
  • U.K. manufacturing production m/m: -1.1% vs. -0.2% expected, 0.5% previous
  • U.K. manufacturing production y/y: -1.8% vs. -0.7% expected, -0.3% previous
  • Canada’s jobs report coming up

We had another very choppy morning London forex session today, with the Loonie being the only real mover. The pound’s also worth mentioning, though, since pound pairs had almost exactly the same forex price action.

Major Events/Reports:

Disappointing U.K. economic reports – The United Kingdom’s trade deficit (goods only) in February was wider than expected at £11.96B (-£10.50B expected), which is a real disappointment, but it’s slightly smaller than the previous month’s £12.16B deficit, so it’s not necessarily a poor reading. According to the details of the trade report, the narrower trade deficit was due to a £0.3B rise in exports, mainly from an increase in exported chemicals.

Moving on, another disappointing economic report was the 1.1% month-on-month drop in manufacturing production, which translates to a year-on-year contraction of 1.8%. The year-on-year drop is the largest on record since July 2013, according to the details of the report. In addition, 10 of the 13 manufacturing sub-sectors were on the back foot, with the 10.6% slump in the “manufacture of machinery & equipment not elsewhere classified” being the main drag.

Oil on the offensive – Oil benchmarks extended their earlier gains during the morning London session, with U.S. crude oil up by 3.54% to $38.58 per barrel and Brent crude oil up by 3.14% to $40.67 per barrel near the end of the morning London session.

The continuing rise in oil prices was apparently being fueled (hah!) by a surprising decline in U.S. crude oil inventories and renewed speculation that oil producers would be able to reach an agreement during the highly-anticipated oil freeze deal in Doha, according to market analysts.

Risk appetite plants its flag – It looks like European markets are on course to finishing the week on a high note, with the pan-European FTSEurofirst 300 up by 0.85% to 1,299.35 and the DAX up by 0.94% to 9,620.00 during the morning London session.

U.S. equity futures are also enjoying the upbeat mood, with the S&P 500 futures up by 0.52% to 2,045.50 and the Nasdaq futures up by 0.54% to 4,494.38 during the session, hinting that the risk-on sentiment will be spilling over into the U.S. session. The risk-taking during the morning London session was giving the safe-haven gold a hard time, though, since it was very slightly down by 0.05% to $1,236.90 per troy ounce.

Market analysts attributed the prevailing risk appetite to rising oil prices, given that oil stocks were the top performers. I wouldn’t rule out profit-taking, though. After all, European equities got a beating for most of the week.

Major Currency Movers:

CAD – Most currency pairs were either bound in tight ranges or had lots of volatility but little to no directional movement during the morning London session. However, the Loonie was clearly on the move, and it was moving higher against its forex rivals.

The continuing oil price rally is the most likely reason for the Loonie’s strength but it’s also possible that forex traders were opening preemptive positions ahead of Canada’s jobs report. By the way, if you’re planning to trade that economic report, make sure to read up on Forex Gump’s Forex Preview for that (read it here).

USD/CAD was down by 39 pips (-0.29%) to 1.3070, AUD/CAD was down by 20 pips (-0.20%) to 0.9853, NZD/CAD was down by 20 pips (-0.22%) to 0.8871

GBP – The pound’s forex price action during the morning London session was rather choppy, but there was uniformity in all that chaos since pound pairs were moving in almost exactly the same way.

The pound began by jumping higher across the board at the start of the morning London session. It’s not clear why the pound behaved the way it did since there weren’t any catalysts for the pound’s strength at the time. However, it’s possible that pound shorts were just taking profits off the table. After all, the pound has been universally weak since Tuesday.

Getting back on topic, the pound’s initial jump was quickly ended since pound pairs began grinding lower across the board after the disappointing U.K. economic reports. Most pound pairs still ended the morning London session on a high note, though.

GBP/USD was up by 31 pips (+0.22%) to 1.4082 with 1.4140 as session high, GBP/JPY was up by 20 pips (+0.13%) to 152.99 with 154.22 as session high, GBP/CAD was down by 14 pips (-0.08%) to 1.8404 with 1.8497 as session high

Watch Out For:

  • 1:15 pm GMT: Canadian housing starts (190.0k expected, 212.5K previous)
  • 1:30 pm GMT: Canadian jobless rate (steady at 7.3% expected)
  • 1:30 pm GMT: Canadian net change in employment (10.K expected, -2.3K previous)
  • 1:30 pm GMT: New York Fed President William Dudley will deliver a speech
  • 3:00 pm GMT: NIESR U.K. GDp estimate (0.3% previous)
  • 3:00 pm GMT: U.S. wholesale inventories (-0.2% expected, 0.3% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis.

Head on to Big Pippin’s Daily Chart Art for some pip-locking technical weeks!