London Session Forex Recap – June 10, 2016

  • German final HICP m/m: unchanged at 0.4% as expected
  • German final HICP y/y: unchanged at 0.0% as expected
  • German WPI m/m: 0.9% v.s 02.% expected, 0.3% previous
  • French industrial production m/m: 1.9% vs. 1.0% expected, -0.8% previous
  • Italian industrial production m/m: 0.5% vs. 0.3% expected, 0.0% previous
  • U.K. construction output m/m: 2.5% vs. 1.2% expected, -3.6% previous
  • U.K. construction output y/y: -3.7% vs. -4.8% expected, -4.5% previous
  • Canadian jobs report coming up

European traders were probably busy getting ready for the UEFA Euro 2016 because volatility was subdued during today’s morning London session. There was some movement from the safe-havens, though, likely because of another round of risk aversion.

Major Events/Reports:

Schäuble speaks – German Finance Minister Wolfgang Schäuble was interviewed by Der Spiegel earlier, and he warned that the U.K. won’t get easy access to the E.U. market in case a Brexit does occur, saying that “If the majority in Britain opts for Brexit, that would be a decision against the single market. In is in. Out is out. One has to respect the sovereignty of the British people.”

He also implied that the U.K. needs the E.U., but that the E.U. does not need the U.K., saying that “Europe will also work without Britain if necessary,” and that “At some point, the British will realise they have taken the wrong decision. And then we will accept them back one day, if that’s what they want.”

Commodities still bleeding out – The broad-based commodities rout has no brakes since commodities extended their losses during today’s morning London session.

The precious metal gold was down by 0.20% to $1,270.15 per troy ounce while the base metal copper was down by 0.29% to $2.033 per pound. As for oil benchmarks, U.S. crude oil was slumped by 1.42% to $49.84 per barrel while Brent blend crude oil dropped by 1.31% to $51.27 per barrel by the end of the session.

Market analysts were pointing to the Greenback’s bounce-back since a stronger Greenback means that globally-traded commodities become relatively more expensive for buyers who are holding currencies other than the U.S. dollar.

Another round of risk aversion – Risk aversion was the name of the game in European markets, with most major European equity indices down for the third consecutive day.

The pan-European FTSEurofirst 300 was down by 1.94% to 1,314.20, the blue-chip Euro Stoxx 50 was down by a painful 2.25% to 2,922.50, and the DAX tumbled by 2.20% to 9,867.00. Meanwhile, U.S. equity futures were signalling a possible spill over into the U.S. session, since the S&P 500 futures index was down by 0.60% to 2,101.50 while the Nasdaq futures index was down by 0.71% to 4,480.12.

Market analysts were attributing the overall aversion to risk to the broad-based slide in commodities, given that mining and energy companies were the main losers during the session.

Major Currency Movers:

Safe-havens – Yet another round of risk aversion meant more demand for the the safe-haven currencies (JPY, USD, CHF). As usual, the Japanese yen was the safe-haven of choice for most forex traders since it was able to win out against its fellow safe-havens.

USD/JPY was down by 11 pips (-0.11%) to 106.83, GBP/JPY was down by 64 pips (-0.42%) to 153.85, CAD/JPY was down by 17 pips (-0.19%) to 83.81

USD/CHF was down by 5 pips (-0.05%) to 0.9637, CAD/CHF was down by 10 pips (-0.14%) to 0.7561, GBP/CHF was down by 50 pips (-0.37%) to 1.3879

AUD/USD was down by 14 pips (-0.20%) to 0.7398, NZD/USD was down by 11 pips (-0.16%) to 0.7085, GBP/USD was down by 44 pips (-0.31%) to 1.4400

GBP – The pound was the weakest currency during the morning London session. There weren’t any apparent catalysts for the broad weakness, and the U.K. even got better-than-expected readings for construction output.

There weren’t any major polls, but financial media outlets were carrying some Brexit-themed news, with the most pessimistic one being German Finance Minister Wolfgang Schäuble’s threats that the E.U. market would be closed to the U.K. in the event that Britons vote for a Brexit. Perhaps that soured sentiment on the pound.

GBP/AUD was down by 23 pips (-0.12%) to 1.9462, GBP/NZD was down by 30 pips (-0.15%) to 2.0321, GBP/CAD was down by 37 pips (-0.20%) to 1.8356

Watch Out For:

  • 12:30 pm GMT: Canadian net change in employment (1.8k expected, -2.1K previous)
  • 12:30 pm GMT: Canadian jobless rate (7.2% expected, 7.1% previous)
  • 2:00 pm GMT: Preliminary UoM consumer sentiment (94.0 expected, 94.7 previous)
  • 2:00 pm GMT: Preliminary UoM current conditions (108.8 expected, 109.9 previous)
  • 2:00 pm GMT: Preliminary UoM inflation expectations (2.4% previous)
  • 6:00 pm GMT: U.S. federal budget balance (-$56.0B expected, -$106.5B previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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