London Session Forex Recap – June 7, 2016

  • French current account: -€2.8B vs. -€1.9B previous
  • French trade balance: -€5.2B vs. -€4.2B previous
  • German industrial production m/m: 0.8% vs. 0.75 expected, -1.1% previous
  • German industrial production y/y: 1.2% vs. 1.0% expected, 0.4% previous
  • Swiss foreign currency reserves: CHF 602.06B vs. CHF 587.88B previous
  • U.K. Halifax HPI m/m: 0.6% vs. 0.4% expected, -0.8% previous
  • Euro Zone final Q1 GDP q/q: revised higher to 0.6% vs. steady at 0.5% expected
  • Euro Zone final Q1 GDP y/y: revised higher to 1.7% vs. steady at 1.5% expected

Risk appetite was driving forex price action for the most part during the morning London session, although the pound continued getting a boost from anti-Brexit polls while the Swissy rose despite the risk-on environment.

Major Events/Reports:

SNB foreign currency reserves rise – The SNB’s foreign currency reserves jumped from CHF 587.88 billion to CHF 602.06 billion in May, which is a sign that the SNB may have been trying to weaken the Swissy again. That didn’t seem to dent demand for the Swissy, though.

Commodities crumbleCommodities were broadly in retreat during the morning London session, with metals leading the way.  The precious metal gold down by 0.47% to $1,241.5 per troy ounce while silver was slapped 0.89% lower to $16.300 per troy ounce. As for the base metal copper, it was kicked 2.34% lower to $2.068 per pound.

The lack of demand for precious metals was likely due to the risk-on sentiment during the session. The slump in base metal prices, meanwhile, was being attributed by market analysts to weak demand from China.

Oil climbs higher – One noteworthy commodity that was floating while almost all others were sinking was oil, with U.S. crude oil up by 0.93% to $50.15 per barrel and Brent blend crude oil up by 1.09% to $51.10 per barrel by the end of the session.

Market analysts pointed to easing oversupply concerns in light of lower oil output from Nigeria after the so-called “Niger Delta Avengers” sabotaged oil pipelines and other oil-related infrastructure.

Risk appetite here to stay – There was risk-taking aplenty during the morning London session, with the pan-European FTSEurofirst 300 up by 1.35% to 1,362.38, the blue-chip Euro Stoxx 50 up by 1.37% to 3,046.00, and the DAX up by 1.72% to 10,295.50 by the end of the session. U.S. equity futures were also signalling that the risk-on vibes may carry over into the U.S. session since the S&P 500 futures index was up by 0.23% to 2,113.00 while the Nasdaq futures index was up by 0.20% to 4,534.38.

Pretty much all market analysts attributed the prevalence of risk appetite to rising oil prices, as well as Yellen’s comments yesterday, which pushed backed rate hike expectations.

Major Currency Movers:

GBP – The pound was the best-performing currency during session, and we can probably thank the anti-Brexit polls that were released during the earlier Asian session for that.

GBP/USD was up by 71 pips (+0.50%) to 1.4572, GBP/JPY was up by 98 pips (+0.63%) to 157.00, GBP/AUD was up by 87 pips (+0.45%) to 1.9592

JPY – The risk-friendly environment during the session was not friendly for most of the safe-haven currencies, but it most hostile to the safe-haven yen since the yen ended up as the weakest currency of the session.

USD/JPY was up by 13 pips (+0.12%) to 107.72, CHF/JPY was up by 56 pips (+0.51%) to 111.33, NZD/JPY was up by 35 pips (+0.48%) to 74.91

CHF – The Swissy is a safe-haven currency as well, but it continued yesterday’s theme of gaining strength despite the risk-on environment. Heck, it continued rising despite a jump in the SNB’s foreign currency reserves. There weren’t any other catalysts for the Swissy’s strength, but it’s possible that the Swissy is getting capital flows ahead of the June 23 Brexit referendum.

USD/CHF was down by 36 pips (-0.38%) to 0.9674, EUR/CHF was down by 49 pips (-0.46%) to 1.0976, AUD/CHF was down by 25 pips (-0.25%) to 0.7194

Watch Out For:

  • 12:30 pm GMT: U.S. final nonfarm productivity (-0.6% expected, -1.0% originally)
  • 12:30 pm GMT: U.S. final unit labor costs (downgrade from 4.1% to 4.0% expected)
  • 2:00 pm GMT: U.S. IBD consumer optimism (48.2 expected, 48.7 previous)
  • 2:00 pm GMT: Canada’s Ivey PMI (51.0 expected, 53.1 previous)
  • 7:00 pm GMT: U.S. consumer credit ($18.00B expected, $27.67B previous)
  • 10:45 pm GMT: New Zealand’s manufacturing activity (-1.9% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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