London Session Forex Recap – Apr. 27, 2016

  • UBS Swiss consumption indicator: 1.51 vs. 1.45 previous
  • GFK German consumer sentiment: 9.7 vs. 9.4 expected, 9.4 previous
  • German import price index m/m: 0.7% vs. 0.3% expected, -0.6% previou
  • Euro Zone M3 money supply y/y: 5.0% as expected vs. 4.9% previous
  • Euro Zone private loans y/y: 1.6% vs. 1.7% expected, 1.6% previous
  • French INSEE consumer confidence: 94 v.s 95 expected, 94 previous
  • U.K. preliminary Q1 GDP q/q: 0.4% as expected, 0.6% previous
  • U.K. preliminary Q1 GDP y/y: 2.1% vs. 2.0% expected, 2.1% previous
  • U.K. index of services q/q: 0.7% vs. 0.8% expected, 0.9% previous
  • U.K. CBI realized sales: -13 vs. 15 expected, 7 previous
  • FOMC and RBNZ monetary policy statements later

Compared to the earlier Asian session, price action during today’s morning London trading session was more subdued and choppy, probably because forex traders are waiting for the FOMC and RBNZ monetary policy statements to be released.

Major Events/Reports:

Preliminary Q1 2016 U.K. GDP report – The U.K. Office for National Statistics (ONS) released the Q1 2016 GDP report earlier, and it turns out that the U.K. economy grew by 0.4% quarter-on-quarter as expected. However, this is slower than the previous quarter’s upwardly revised reading of 0.6% (0.5% originally).

The slight slowdown was due to another round of weakness in manufacturing, mining, and construction, as well as weaker growth in the service sector (0.6% vs. 0.8% back in Q4 2015). The service sector continues to power the U.K. economy, though, adding around 0.5% to quarter-on-quarter GDP growth.

On a more upbeat note, the year-on-year GDP reading came in at 2.1%, which is better than the expected 2.0% and the same rate of expansion as in Q4 2015.

Oil benchmarks soar – Oil was in rally-mode during the morning London session, with U.S. WTI crude oil up by 2.24% to $45.02 per barrel after reaching as high as $45.12 per barrel a couple of hours ago, which is the first time since November 2015 that oil reached the $45 mark. Brent crude oil was also doing very well since it was up 2.41% to $46.68 per barrel after reaching an intraday high of $46.84 earlier.

Market analysts attributed the oil rally to the relatively weaker U.S. dollar and signs that U.S. crude oil production was weakening, easing the oil glut from the supply side.

Pre-FOMC and RBNZ skittishness – Forex traders tend to behave themselves ahead of top-tier events like the upcoming FOMC and RBNZ statements, resulting in lower volatility and poorly defined directional movement. Well, today was certainly a very normal day since most pairs had choppy price action and volatility was less lively compared to the earlier session.

Major Currency Movers:

CAD – The Loonie was easily the strongest currency during the morning London session, and we can probably thank the oil rally for that.

USD/CAD was down by 22 pips (-0.18%) to 1.2588, EUR/CAD was down by 54 pips (-0.38%) to 1.4227, AUD/CAD was down by 31 pips (-0.33%) to 0.9565

NZD – The Kiwi was very noticeably weak against all of its forex rivals during the morning London session. There weren’t any catalysts for the Kiwi’s weakness, but it’s probably safe to assume that traders were just opening preemptive positions or unwinding their existing positions ahead of the RBNZ statement for later.

NZD/USD was down by 28 pips (-0.42%) to 0.6850, NZD/JPY was down by 19 pips (-0.25%) to 76.25, NZD/CAD was down by 50 pips (-0.58%) to 0.8624

GBP – The pound weakened across the board when the London session opened, probably because forex traders were speculating a worse-than-expected reading for the Q1 2016 GDP report. However, the quarter-on-quarter reading was within expectations and the year-on-year reading was even able to beat expectations, so those forex traders who went short probably used the GDP report as a catalyst to get out of their shorts, sending the pound higher against most of its peers but ultimately ending the session mixed.

GBP/USD was down by 5 pips (-0.04%) to 1.4588 with 1.4545 as session low, GBP/JPY was up by 22 pips (+0.14%) to 162.43 with 161.61 as session low, GBP/NZD was up by 64 pips (+0.40%) to 2.1297 with 2.1165 as session low

Watch Out For:

  • 1:30 pm GMT: U.S. advanced goods trade balance (-$62.8B expected, -$62.9B previous)
  • 3:00 pm GMT: U.S. pending home sales (0.2% expected, 3.5% previous)
  • 3:30 pm GMT: U.S. crude oil inventories (1.4M expected, 2.1M previous)
  • 7:00 pm GMT: FOMC rate decision and statement (expected to maintain the federal funds rate at 0.50%)
  • 10:00 pm GMT: RBNZ rate decision and statement (expected to keep the OCR steady at 2.25%)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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