London Session Forex Recap – Apr. 11, 2016

  • Italian industrial production m/m: -0.6% vs. -0.7% expected, 1.7% previous
  • Italian industrial production y/y: 1.2% vs. 1.6% expected, 3.8% previous

The forex calendar for Monday’s morning London session only had one mid-tier item on the docket, but there was a lot of action, as forex traders turned mainly to risk sentiment for direction.

Major Events/Reports:

Oil slides lower – Oil benchmarks gave back their earlier gains and ended the morning London session in the red, thanks to jitters that the looming April 17 meeting to freeze oil production would not have a very significant impact in reducing the oil glut, according to market analysts.

U.S. crude oil was down by 0.60% to $39.48 per barrel after reaching as high as $40.22 earlier while Brent blend crude was down by 0.33% to $41.80 per barrel after opening higher at $42.37.

Risk-on start to the week – Risk-taking was the name of the game during the morning London session, with the pan-European FTSEurofirst 300 up by 0.58% to 1,311.82 and the DAX up by a solid 1.14% to 9,732.00 during the session. U.S. equity futures were also hinting that the risk-on vibes will likely spill-over into the U.S. session, with the S&P 500 futures up by 0.39% to 2,048.75 and the Nasdaq futures up by 0.44% to 4,487.00 during the morning London session.

Market analysts noted that the Italian banking sector was leading European equities higher, with speculation that the “Italian government will soon thrash out a plan to set up a state-backed fund to buy bad loans and plug capital shortfalls” being cited as the main reason for the rally.

Kuroda speaks – BOJ Governor Haruhiko Kuroda delivered a scheduled speech in Tokyo during the morning London session, and he said that the BOJ will “take additional policy action in terms of three dimensions – quantity, quality and the interest rate – if it’s judged necessary for achieving the price target without hesitation.”

However, he also tried to avoid impressing a sense of urgency by saying that “The underlying trend of prices has been improving steadily.”

Major Currency Movers:

Comdolls – The risk-on sentiment during the morning London session naturally fueled demand for the higher-yielding currencies, namely the comdolls (AUD, CAD, NZD). The Kiwi ended up being the leader of the pack, although there wasn’t really any catalysts for the Kiwi’s strength. The Loonie, meanwhile, was the weakest link among the three, probably because of retreating oil prices.

AUD/JPY was up by 35 pips (+0.44%) to 81.85, AUD/CAD was up by 9 pips (+0.09%) to 0.9822

CAD/CHF was up by 18 pips (+0.24%) to 0.7352, CAD/JPY was up by 27 pips (+0.34%) to 83.32

NZD/CHF was up by 23 pips (+0.36%) to 0.6520, NZD/JPY was up by 31 pips (+0.43%) to 73.88

Safe-havens – The safe-haven currencies (USD, JPY, CHF) were getting squeezed by the prevailing risk-on sentiment, but the Japanese yen was getting squeezed the hardest, probably because of Kuroda’s speech from earlier. The Greenback, meanwhile, was the strongest among the three safe-haven currencies.

USD/CHF was up by 24 pips (+0.26%) to 0.9552, USD/JPY was up by 37 pips (+0.35%) to 108.23

AUD/CHF was up by 23 pips (+0.33%) to 0.7222, NZD/CHF was up by 22 pips (+0.35%) to 0.6520

GBP/JPY was up by 145 pips (+0.95%) to 153.94, EUR/JPY was up by 18 pips (+0.15%) to 123.31

GBP – The pound was the one currency to rule them all during the morning London session. The forex calendar was practically empty, so the sudden demand for the pound was somewhat of a mystery. However, it’s possible that forex traders who were shorting the pound last week (and the weeks before that) were taking profits off the table ahead of the MPC meeting this Thursday.

GBP/USD was up by 83 pips (+0.58%) to 1.4221, GBP/CHF was up by 113 pips (+0.84%) to 1.3585, GBP/NZD was up by 99 pips (+0.48%) to 2.0827

Watch Out For:

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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