London Session Forex Recap – May 10, 2016

  • Swiss jobless rate: 3.5% as expected vs. 3.4% previous
  • German industrial production m/m: -1.3% vs. -0.2% expected, -0.7% previous
  • German industrial production y/y: 0.3% vs. 1.1% expected, 2.0% previous
  • German current account: €30.4B vs. €25.0B expected, €21.1B previous
  • German trade balance: €26.0B vs. €20.6B expected, €20.2B previous
  • French industrial production m/m: -0.3% vs. 0.6% expected, -1.3% previous
  • French industrial production y/y: -0.8% vs. 0.5% expected, 0.4% previous
  • U.K. visible trade balance: -£11.20B vs. -11.45B expected, -£11,43B previous
  • U.S. NFIB small business index: 93.6 vs. 93.2 expected, 92.6 previous

Forex price action was rather choppy (and also a bit wonky) during today’s morning London session, but risk sentiment seems to be the main driver for the most part.

Major Events/Reports:

U.K. trade gap narrows – The United Kingdom’s goods trade deficit narrowed a bit in March, from £11.43 billion to £11.20 billion when it was expected to widen to 11.45 billion. The narrower trade deficit in goods was due to an increase in exports of £0.4 billion.

More business back a Brexit – The British Chambers of Commerce released the results of a survey conducted back in April among 2,200 of its members, and it showed that 54% of its members are still voting to remain in the E.U., but this has slid down from 60% back in February. Also, the percentage of businesses that are voting in support of a Brexit climbed to 37% from 30%.

There’s a silver lining (for the anti-Brexit camp), however, since 90% of the survey participants said that were unlikely to change their minds when the Brexit referendum finally rolls around in June.

More intervention talks from Japan – Koichi Hamada, a special adviser to Japanese Prime Minister Shinzo Abe, was interviewed by Reuters earlier and he said that “In case the yen happens to be so firm that it becomes between 90-95 yen per dollar, then Japan would have to intervene even if it angers the United States.” Hamada also told Reuters that the BOJ likely won’t be making a move soon since the BOJ is still in wait-and-see mode.

Progress in Greece – In a press release, uh, released earlier, the European Commission announced that “Eurogroup made progress towards the completion of the first review of the Greek programme.” Several things were apparently discussed, including how Greece is faring and the need for Greece to comply with all its obligations. They also discussed a contingency mechanism, “which should deliver an extra layer of reassurance concerning the achievement of the agreed fiscal targets.”

Risk appetite persists – Risk-taking was the name of the game for most of the morning London session, with the pan-European FTSEurofirst 300 up by 1.12% to 1,323.79, the Euro Stoxx 50 up by 0.82% to 2,978.00, and the DAX up by 0.38% to 10,018.00 near the end of the session.

As for the safe-haven gold, it slipped 0.10% lower to $1,264.50 per troy ounce while U.S. equity futures were modestly in positive territory, with the S&P 500 futures up by 0.23% to 2,059.00 and the Nasdaq futures up by 0.16% to 4,342.62 by the end of the morning London session.

Market analysts attributed the risk-on sentiment to the risk sentiment spillover from the Asian session, the progress in Greek talks, and promising earnings reports for European companies.

Major Currency Movers:

JPY and CHF – The prevalence of risk appetite during the morning London session meant that there was little demand for the safe-havens currencies. Although more intervention talks probably helped to kick the yen lower as well.

USD/JPY was up by 46 pips (+0.43%) to 109.19, EUR/JPY was up by 29 pips (+0.24%) to 124.10, GBP/JPY was up by 79 pips (+0.50%) to 157.55

USD/CHF was up by 33 pips (+0.34%) to 0.9741, AUD/CHF was up by 12 pips (+0.18%) to 0.7141, EUR/CHF was up by 18 pips (+0.16%) to 1.1073

USD – The Greenback is a safe-haven currency as well, but it was the second-strongest currency during the morning London session. There weren’t any major catalysts for the Greenback, but the underlying strength that has been pushing the Greenback higher since last week, which seems to be linked to yen weakness, and that I mentioned in last week’s Top Forex Market Movers, probably had something to do with it.

AUD/USD was down by 13 pips (-0.18%) to 0.7330, NZD/USD was down by 25 pips (-0.38%) to 0.6728, EUR/USD was down by 22 pips (-0.20%) to 1.1365

GBP – The pound was the one currency to rule them all during the morning London session since it barely won out against the mighty Greenback. From the looks of it, the pound began climbing higher after the U.K. printed an increase in exports that allowed its goods trade deficit to narrow a bit.

GBP/USD was up by 11 pips (+0.08%) to 1.4429, GBP/AUD was up by 52 pips (+0.27%) to 1.9682, GBP/CHF was up by 59 pips (+0.43%) to 1.4056

Watch Out For:

  • 2:00 pm GMT: U.S. wholesale inventories (0.1% expected, -0.5% previous)
  • 2:00 pm GMT: JOLTS U.S. job openings (5.55m expected, 5.45M previous)
  • 9:00 pm GMT: RBNZ financial stability report
  • 9:05 pm GMT: RBNZ press conference on the financial stability reports

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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