London Session Forex Recap – May 25, 2016

  • German GFK consumer sentiment: 9.8 vs. 9.7 expected, 9.7 previous
  • Swiss UBS consumption indicator: 1.47 vs. 1.40 previous
  • German IFO current conditions: 114.2 vs. 113.4 expected, 113.2 previous
  • German IFO business climate: 107.7 vs. 106.8 expected. 106.7 previous
  • Swiss ZEW economic expectations: 17.5 vs. 11.5 previous
  • BOC rate decision later

Forex price action during the morning London session was determined by commodities and risk sentiment for the most part. Although the pound also got a bullish boost due to lower odds of a Brexit.

Major Events/Reports:

Commodities extend their gainsMost commodities were in rally mode during the morning London session, with the base metal copper up by 0.80% to $2.083 per pound. Oil benchmarks also got a boost, with U.S. crude oil up by 1.11% to $49.16 per barrel and Brent crude oil up by 1.21% to $49.20 per barrel.

Not all commodities were climbing higher, though. One commodity that wasn’t getting some love was the safe-haven gold since it was down by 0.59% to 1,222.00 per troy ounce, likely because of the prevalence of risk appetite during the session. Iron ore was another noteworthy commodity that couldn’t get a break, probably because reports continue to surface regarding lack of demand from Chinese steel mills.

Anyhow, the broad-based commodities rally came after the Chinese Securities Regulatory Commission (CSRC) announced that the measures it has implemented to crack down on excessive speculation is finally taking effect, which implies that China won’t be as strict in curbing speculation as before.

Very risk-friendly session – Risk aversion was nowhere in sight during the morning London session, with the pan-European FTSEurofirst 300 up by 1.02% to 1,363.43, the Euro Stoxx 50 up by 1.38% to 3,055.50, and the DAX up by 1.30% to 10,188.00 by the end of the session. U.S. equity futures were also buoyed by the general risk-on environment, with the S&P 500 futures index up by 0.42% to 2,083.75 and the Nasdaq futures index up by 0.51% to 4,468.00 during the session.

Market analysts attributed the risk-on vibes to easing concerns on a Grexit and Brexit respectively. Risk of a Grexit apparently got reduced after a “breakthrough” in Greek debt relief negotiations while higher odds that the “remain” camp will win during the June referendum eased jitters over a potential Brexit.

Speaking of odds for a Brexit, Forex Gump has the juicy details on how Brexit-related polls are doing and where and how you can get them, if you’re interested. Read his write-up here.

Major Currency Movers:

CAD – Loonie pairs were under bearish pressure despite the higher oil prices and general risk appetite during the morning London session. This was likely because Canadian oil companies haven’t restarted production yet and the wildfires that disrupted oil production are threatening to move east, which will likely inflict even more damage on Canada.

Another possible reason is that forex traders are sitting on their hands ahead of the BOC rate decision in order to avoid being too exposed if the BOC says or does something unexpected. By the way, Forex Gump has a Forex Trading Guide for this event, so read that here if you’re interested.

USD/CAD was up by 16 pips (+0.13%) to 1.3108, NZD/CAD was up by 15 pips (+0.18%) to 0.8861, GBP/CAD was up by 135 pips (+0.71%) to 1.9259

JPY – Today’s morning London session was another morning London session so the safe-havens saw very limited demand once again. The yen was different, though, since it got a mighty good beating across the board.

USD/JPY was up by 22 pips (+0.20%) to 110.15, EUR/JPY was up by 20 pips (+0.17%) to 122.80, CHF/JPY was up by 29 pips (+0.27%) to 111.16

GBP – Pound pairs spiked higher when the morning London session opened, probably because of the lower odds that a Brexit will occur, before correcting a bit, possibly because of profit-taking. The pound then resumed its climb to end the session as the strongest currency of them all.

GBP/USD was up by 84 pips (+0.57%) to 1.4691, GBP/JPY was up by 125 pips (+0.78%) to 161.82, GBP/CHF was up by 74 pips (+0.52%) to 1.4557

Watch Out For:

  • 12:30 pm GMT: U.S. advanced goods trade balance (-$60.0B expected, -56.9B previous)
  • 1:00 pm GMT: U.S. FHFA HPI (0.5% expected, 0.4% previous)
  • 1:45 pm GMT: Markit’s flash U.S. services PMI (53.1 expected, 52.8 previous)
  • 2:00 pm GMT: BOC rate decision (maintain overnight rate at 0.5% expected)
  • 2:30 pm GMT: U.S. crude oil inventories (-1.7M expected, 1.3M previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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