London Session Forex Recap – Apr. 12, 2016

  • German final HICP m/m: no revision from 0.8% as expected
  • German final HICP y/y: no revision from 0.1% as expected
  • German WPI m/m: 0.3% as expected, -0.5% previous
  • U.K. CPI m/m: 0.4% vs. 0.3% expected, 0.2% previous
  • U.K. CPI y/y: 0.5% vs. 0.4% expected, 0.3% previous
  • U.K. PPI input m/m: 2.0% vs. 2.4% expected, 0.1% previous
  • U.K. PPI output m/m: 0.3% vs. 0.3% expected, 0.1% previous
  • U.K. RPI y/y: 1.6% vs. 1.4% expected, 1.3% previous
  • U.K. HPI y/y: 7.6% vs. 8.1% expected, 7.9% previous
  • U.S. NFIB small business index: 92.6 vs. 93.9 expected, 92.9 previous

Today’s morning London forex session was another risk-on trading session, so the lower-yielding currencies got slapped around by the higher-yielding ones yet again.

Major Events/Reports:

U.K. CPI report – The United Kingdom’s CPI readings for the March period came in better-than-expected and better than their respective previous readings, with the month-on-month reading rising by 0.4% (0.3% expected, 0.2% previous) and the year-on-year reading showing an increase of 0.5% (0.4% expected, 0.3% previous).

According to the CPI report, the main drivers for the better-than-expected year-on-year reading were the rise in air fares and higher clothing prices. The main drags, meanwhile, were falling food prices and weaker rise in petrol prices.

Commodities in rally modeCommodities were broadly in positive territory during the morning London session. Precious metals were slightly in the green (despite the prevalence of risk appetite), with gold up by 0.08% to $1,258.90 per troy ounce during the session. Base metals were also on the rise, with copper up by 0.60% to $2.103 per pound during the morning London session. Oil benchmarks were also glowing green, with U.S. crude oil up by 0.72% to $40.65 per barrel and Brent crude oil up by 0.93% to $43.23 per barrel.

The strong demand for commodities, particularly base metals, was apparently due to a pickup in seasonal demand from China, according to market analysts. Some market analysts also opined that the demand for oil was being, uh, fueled by renewed optimism that the coming oil freeze meeting will be a success, not to mention higher car sales in China, which may pump up demand for gasoline.

Another risk-on session – We had another round of risk-taking during today’s morning London session, with the pan-European FTSEurofirst 300 up by 0.27% to 1,311.70 and the DAX up by 0.37% to 9,719.00 U.S. equity futures, meanwhile, were also in positive territory, with the S&P 500 futures up by 0.32% to 2,041.00 and the Nasdaq futures up by 0.34% to 4,466.62.

Market analysts highlighted that mining companies were leading the uphill charge, so it’s probably safe to say that the broad-based commodities rally was the main reason for the risk-on sentiment.

Major Currency Movers:

AUD – The higher-yielding comdolls (AUD, CAD, NZD) were getting a boost from the risk-on sentiment, but the Aussie got the most loving from forex traders. As to why the Aussie was the chosen one during the morning London session, that may have been due to forex traders pricing-in the jump in Australian business confidence, as revealed by the NAB business survey from the earlier session.

AUD/USD was up by 24 pips (+0.32%) to 0.7662, AUD/CHF was up by 27 pips (+0.37%) to 0.7304, AUD/JPY was up by 21 pips (+0.25%) to 82.97

CHF – The risk-on environment was pretty toxic for the safe-haven currencies (USD, JPY, CHF), but the Swissy was particularly vulnerable. There weren’t any catalysts for the Swissy’s weakness, though.

USD/CHF was up by 7 pips (+0.08%) to 0.9534, CAD/CHF was up by 23 pips (+0.31%) to 0.7411, NZD/CHF was up by 13 pips (+0.21%) to 0.6568

EUR – The Swissy may have been weak, but the euro was even weaker, making the euro the weakest currency of them all (at least during the morning London session). The euro’s broad weakness was likely due to the risk-taking during the session, which enticed market players to abandon the lower-yielding euro in favor of commodities, European equities, and higher-yielding currencies.

EUR/USD was down by 11 pips (-0.10%) to 1.1409, EUR/JPY was down by 11 pips (-0.09%) to 123.57, EUR/CHF was down by 3 pips (-0.03%) to 1.0877

GBP – If the Swissy was the weakest currency of them all, then the pound was easily the one currency to rule them all since it even managed to trump the comdolls. The pound actually started the morning London session on a weak footing, but sentiment on the pound rapidly improved when the CPI readings came in better-than-expected, which probably fueled speculation that the BOE won’t be as dovish during this Thursday’s MPC rate decision and statement.

GBP/USD was up by 55 pips (+0.39%) to 1.4314, GBP/AUD was up by 22 pips (+0.12%) to 1.8686, GBP/NZD was up by 56 pips (+0.27%) to 2.0776

Watch Out For:

  • 1:30 pm GMT: U.S. import prices (1.0% expected, -0.3% previous)
  • 7:00 pm GMT: U.S. Federal budget balance (-$105.0B expected, -$192.6B previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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