London Session Forex Recap – May 30, 2016

  • U.K. on Spring Bank Holiday today
  • German PPI m/m: -0.1% vs. 0.3% expected, 0.7% previous
  • French Q1 GDP (2nd est.) q/q: revised higher to 0.6% vs. steady at 0.5% expected
  • French Q1 GDP (2nd est.) y/y: revised higher to 1.4% vs. steady at 1.3% expected
  • French consumer spending m/m: -0.1% v.s 0.1% expected, 1.1% previous
  • Swiss KOF leading indicator: 102.9 vs. 102.8 expected, 102.6 previous
  • Euro Zone consumer sentiment: steady at -7 as expected
  • Euro Zone industrial sentiment: -3.6 vs. -3.5 expected, -3.6 previous
  • Euro Zone business climate: 0.26 vs. 0.19 expected, 0.15 previous

Today’s a Monday and the U.K. market was closed for the day, so volatility wasn’t all that great during the morning London session. Most currency pairs were trading sideways, but there was some noticeable directional movement from pound and Greenback pairs.

Major Events/Reports:

Brexit would be painful – According to a poll of 600 British economists conducted by Ipsos-MORI, 88% of respondents or almost 9 out of 10 economists in the U.K. believe that a Brexit would cause growth in the U.K. to deteriorate over the next five years. That’s not really all that surprising, though, since the the U.K. Treasury already released a report last week, which detailed the likely immediate effects of a Brexit.

Oil dips – Oil benchmarks slid lower during the morning London session, with U.S. crude oil down by 0.12% to $49.27 per barrel and Brent crude oil down by 0.32% to $49.79 per barrel by the end of the session.

Market analysts pointed to expectations that Canadian oil companies may restart operations within the week, as well as the Greenback’s recent strength, especially after Fed Chair Yellen reinforced rate hike expectations during her Friday interview in Harvard.

To the newbies out there, globally-traded commodities are generally denominated in U.S. dollars, so if the Greenback climbs higher, then commodities like oil become relatively more expensive.

Moderate appetite for risk – The European market started the week on a moderately upbeat note, with the pan-European FTSEurofirst 300 up by 0.07% to 1,373.82, the blue-chip Euro Stoxx 50 up by 0.31% to 3,084.50, and the DAX up by 0.32% to 10,319.50. The safe-haven gold, meanwhile, drifted 0.33% lower to $,1212.70 per troy ounce by the end of the session. As for U.S. equity futures, the S&P 500 futures index was up by 0.20% to 2,101.50 while the Nasdaq futures index was up by 0.18% to 4,518.25.

Market analysts attributed the risk-on vibes risk sentiment spillover from the Asian session, although some market analysts are also saying that investors are expecting that the euro’s recent weakness will help make Germany’s exports more competitive, which also explains why the DAX outperformed most other European equity indices.

Major Currency Movers:

GBP – The pound started showing signs of weakness before the morning London session opened and after the Brexit-related poll I mentioned earlier was released, so that was likely the catalyst for the pound’s overall weakness during the session. It possible that forex traders were just taking some profits off the table, though. After all, the pound was the top-performing currency last week.

GBP/AUD was down by 31 pips (-0.16%) to 2.0343, GBP/NZD was down by 39 pips (-0.18%) to 2.1809, GBP/CAD was down by 39 pips (-0.21%) to 1.9055

USD – Like the pound, the Greenback was also retreating across the board before the morning London session opened. There weren’t any direct catalysts that can account for the weakness, but the Greenback’s slide was likely due to profit-taking ahead of the NFP report and after Fed Chair Yellen signalled that a rate hike was “appropriate in the coming months” during last Friday’s Harvard interview.

USD/CHF was down by 17 pips (-0.17%) to 0.9929, USD/JPY was down by 12 pips (-0.11%) to 111.16, USD/CAD was down by 30 pips (-0.23%) to 1.3037

Watch Out For:

  • Memorial Day Holiday in the U.S.A.
  • 12:30 pm GMT: Canada’s current account (-$16.80B expected, -15.38B previous)
  • 12:30 pm GMT: Canadian RMPI (1.1% expected, 4.5% previous)
  • 12:30 pm GMT: Canadian IPPI (0.4% expected, -0.6% previous)
  • 10:45 pm GMT: New Zealand’s building permits (-9.8% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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