London Session Forex Recap – May 20, 2016

  • German PPI m/m: 0.1% as expected vs. 0.0% previous
  • German PPI y/y: -3.1% vs. -3.0% expected, -3.1% previous
  • Euro Zone current account: €27.3B vs. €21.3B expected, €19.2B previous
  • U.K. CBI industrial trends: -8 vs. -13 expected, -11 previous
  • Canada’s retail sales and CPI readings coming up

Volatility got sapped during today’s morning London session, with most currency pairs trapped in tight ranges. Directional movement was obviously in short supply, but the Greenback, the yen, and the Kiwi were showing some signs of movement.

Major Events/Reports:

ECB Makuch speaks – According to ECB Governing Council Member Jozef Makuch, the ECB can still cut rates further if needed but warned that “The scope for deploying standard instruments is almost exhausted” and that continued use of “standard instruments” like rate cuts may “bring about a totally counterproductive threat to financial stability.”

He also added additional easing measures are not needed at the moment because the easing measures introduced during the March 10 policy decision seem to be yielding positive effects, which is a reiteration of what was said in yesterday’s release of the minutes for the April 20-21 ECB meeting.

Commodities rise but oil fallsMost commodities were licking their wounds during today’s morning London session after getting bludgeoned yesterday. The base metal copper was up by 0.73% to $2.076 per pound while the precious metal gold was up by 0.24% to $1,257.75 per troy ounce near the end of the session.

Oil benchmarks weren’t doing too well, though, since they gave back earlier gains and were now in the red, with U.S. crude oil down by 0.37% to $48.49 per barrel and Brent crude oil down by 0.47% to $48.58 per barrel by the end of the session. Market analysts couldn’t pinpoint a catalyst for the fall in oil prices during the session, but it could just be profit-taking since oil had a good week this week.

Risk appetite makes a comeback – Signs of risk-taking were everywhere during the morning London session, with the pan-European FTSEuofirst 300 up by 1.05% to 1,323.70, the Euro Stoxx 50 up by 0.96% to 2,950.50, and the DAX up by 0.91% to 9,885.00 near the end of the session. Even U.S. equity futures were in the green, with the S&P 500 futures index up by 0.25% to 2,043.88 and Nasdaq futures up by 0.35% to 4,332.50 during the morning London session.

Major Currency Movers:

USD – The Greenback was slowly but surely advancing against its forex rivals during the morning London session. This may have been be due continued optimism on the higher probability of a June rate hike, but I doubt it since Greenback pairs were actually range-bound for the most part.

USD/CHF was up by 8 pips (+0.08%) to 0.9914, USD/JPY was up by 22 pips (+0.21%) to 110.34, USD/CAD was up by 13 pips (+0.10%) to 1.3109

NZD – The Kiwi was able to edge out a win against the U.S. dollar to end up as the strongest currency during the morning London session. The Kiwi was actually range-bound (and was even dipping against some currencies) for most of the session, but it got a bullish boost near the end. There weren’t any major catalysts for the sudden bullish interest, though.

NZD/USD was up by 5 pips (+0.06%) to 0.6770, NZD/JPY was up by 20 pips (+0.28%) to 74.70, NZD/CAD was up by 13 pips (+0.15%) to 0.8874

JPY – The yen was got pushed back a bit across the board during the session, likely because market players were abandoning the safe-haven yen for riskier assets like commodities or European equities.

EUR/JPY was up by 24 pips (+0.20%) to 123.80, GBP/JPY was up by 31 pips (+0.20%) to 160.78, CHF/JPY was up by 14 pips (+0.13%) to 111.27

Watch Out For:

  • 12:30 pm GMT: Headline (0.3% expected, 0.6% previous) and core (0.1% expected, 0.7% previous) readings for Canada’s CPI
  • 12:30 pm GMT: Headline (-0.6% expected, 0.4% previous) and core (-0.4% expected, 0.2% previous) reading for Canadian retail sales
  • 1:00 pm GMT: Federal Reserve Governor Daniel Tarullo has a speech
  • 2:00 pm GMT: U.S. existing home sales (5.40M expected, 5.33M previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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