London Session Forex Recap – May 16, 2016

  • Whit Monday holiday in Switzerland, Germany, and France
  • Japan’s preliminary machine tool orders y/y: -26.4% vs. -21.2% previous

Today’s a Monday, with some of the major European markets closed for the day, and the forex calendar was practically empty to boot, so volatility was naturally very subdued. Most currency pairs were milling about in tight ranges, but the Kiwi was clearly on the move.

Major Events/Reports:

Commodities climb higher – Commodities were broadly in the green during the morning London session, with oil and precious metals leading the charge. Gold was up by 0.85% to $1,283.55 per troy ounce while silver was up by 1.21% to $17.340 per troy ounce near the end of the session.

As for oil benchmarks, U.S. crude oil was up by 2.10% to $47.18 per barrel while Brent crude oil was up by 2.11% to $48.84 per barrel.

Demand for precious metals was being attributed to investment demand due to uncertainty over how policies of the major central banks will play out. Although the risk aversion during the session likely convinced some shorter-term market players to load up on the traditional safe-haven assets as well.

As for the surge in oil prices, market analysts are still pointing to Goldman Sach’s assertion from earlier that the oil market is now in a deficit, which means the oil glut is now gone, as well as supply disruption in Nigeria due to sabotage.

Skittish risk sentiment – Some of the major European markets are closed for the Whit Monday holiday, but risk aversion was clearly the name of the game, at least in the European markets, since the U.K. FTSE 100 was down by 0.27% to 6,122.00 while the pan-European FTSEurofirst 300 was down by 0.47% to 1,309.85 by the end of the session.

Market analysts blamed the gloomy mood to disappointing reports for individual companies and jitters over China’s economy after China printed disappointing economic reports over the weekend.

Major Currency Movers:

NZD – Kiwi pairs started climbing higher across the board right from the get-go, even though risk aversion was the prevailing risk sentiment since the start of the morning London session. Commodities extended their gains during the session, which is good news for a comdoll like the Kiwi, but I don’t think that was the main catalyst for the Kiwi’s rise since the other comdolls (AUD, CAD) were range-bound.

NZD/USD was up by 15 pips (+0.23%) to 0.6796, NZD/CAD was up by 18 pips (+0.21%) to 0.8779, NZD/JPY was up by 23 pips (+0.33%) to 73.98

EUR – The euro’s price action was not as clear-cut as the of the Kiwi’s, but the euro was able to end the session on a higher note versus its forex rivals, with the exception of the Kiwi of course. This was likely due to capital flows from European equities to the lower-yielding euro.

EUR/USD was up by 8 pips (+0.07%) to 1.1321, EUR/CHF was up by 17 pips (+0.15%) to 1.1056, EUR/JPY was up by 21 pips (+0.17%) to 123.24

Watch Out For:

  • 12:30 pm GMT: U.S. Empire State survey (6.50 expected, 9.56 previous)
  • 2:00 pm GMT: U.S. NAHB builders survey (59 expected, 58 previous)
  • 2:30 pm GMT: BOC review
  • 8:00 pm GMT: U.S. TIC net long-term flows ($36.5B expected, $72.0B previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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