London Session Forex Recap – Apr. 13, 2016

  • French final HICP m/m: revised to 0.8% vs. unchanged at 0.7% expected
  • French final HICP y/y: revised to -0.1% vs. unchanged at -0.2% expected
  • Euro Zone industrial production m/m: -0.8% vs. -0.7% expected, 1.9% previous
  • Euro Zone industrial production y/y: 0.8% vs. 1.3% expected, 2.9% previous

Risk appetite was well entrenched during the morning London forex session, so we had another lopsided battle between the lower-yielding currencies and the higher-yielding ones.

Major Events/Reports:

Risk appetite prevails yet again – Risk aversion was nowhere in sight during today’s morning London session, with the pan-European FTSEurofirst 300 up by a 2.06% to 1,342.70 and the DAX up by a very solid 2.25% to 9,981.00 while the safe-haven gold was kicked 1.39% lower to 1,243.40 during the morning London session. U.S. equity futures were also in the green, signalling that the risk-on sentiment will likely spillover into the U.S. session, with the S&P 500 futures up by 0.56% to 2,067.25 and Nasdaq futures up by 0.76% to 4,524.12 during the session.

Most market analysts pointed mainly to China’s trade surplus from earlier, which also encouraged risk-taking during the earlier Asian session. Other market analysts also noted that mining companies were leading the way again, but this is likely related to China’s trade surplus as well.

Oil and precious metals go their own way – Commodities may have been climbing higher due to China’s trade data, but oil benchmarks and precious metals like gold and silver were sinking ever deeper during the morning London session.

The lack of demand for precious metals like gold and silver, which are considered safe-haven assets, was very likely because of the prevailing risk-on sentiment. As for the slide in oil benchmarks, market analysts attributed that to vanishing optimism that this coming Sunday’s oil freeze deal would have a significant effect on the oil glut.

The fact that OPEC downgraded its oil demand forecasts for 2016 probably only helped to kick oil benchmarks lower, with U.S. crude oil was down by 1.47% to $41.55 per barrel during the morning London session while Brent blend crude was down by 1.19% to $44.16 per barrel.

Major Currency Movers:

NZD – The prevailing risk-on sentiment allowed the higher-yielding comdolls (AUD, CAD, NZD) to dominate the lower-yielding currencies. Among the comdolls, the Kiwi was noticeably the strongest and even ended the morning London session as the king (or queen) of pips.

There weren’t any catalysts for the Kiwi’s strength, though, but it’s possible that forex traders were not to keen on loading up on the Aussie because Australia’s jobs report is scheduled for release during tomorrow. By the way, Forex Gump has a preview for that event (read it here), so read up on that if you’re planning to trade that.

As for the Loonie, Forex traders were also not too eager to load up on the Loonie, probably because of retreating oil prices and the fact that the BOC will be announcing it rate decision later. Oh, Forex Gump has a write-up for that too (read it here), so go ahead and read up on that if you’re planning to trade that event as well.

NZD/USD was up by 16 pips (+0.23%) to 0.6914, NZD/CHF was up by 43 pips (+0.65%) to 0.6654, NZD/JPY was up by 47 pips (+0.63%) to 75.58

CHF – The safe-haven currencies (USD, CHF, JPY) were getting squeezed during the morning London session, thanks to the risk-on environment. However, the Swissy was significantly weaker than the rest, so much so that it lost out to everything else and ended up as the weakest currency during the session. No catalyst that can account for the Swissy’s weakness, though.

USD/CHF was up by 42 pips (+0.44%) to 0.9626, GBP/CHF was up by 67 pips (+0.49%) to 1.3704, AUD/CHF was up by 43 pips (+0.59%) to 0.7371

EUR – The euro was easily the second-weakest currency during the morning London session, likely because forex traders were jumping ship from the lower-yielding euro to higher-yielding assets, namely European equities. It’s a risk-on session, after all.

EUR/USD was down by 48 pips (-0.43%) to 1.1303, EUR/JPY was down by 12 pips (-0.10%) to 123.47, EUR/NZD was down by 108 pips (-0.66%) to 1.6343

Watch Out For:

  • 1:30 pm GMT: U.S. headline (0.1% expected, -0.1% previous) and core (0.4% expected, -0.1% previous) retail sales readings
  • 1:30 pm GMT: U.S. headline (0.2% expected, -0.2% previous) and core (0.1% expected, 0.0% previous) PPI readings
  • 3:00 pm GMT: BOC rate decision and statement (overnight rate steady at 0.50% expected)
  • 3:30 pm GMT: U.S. crude oil inventories (0.9M expected, -4.9M previous)
  • 4:15 pm GMT: BOC press conference
  • 7:00 pm GMT: U.S. Fed’s Beige Book will be released

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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