London Session Forex Recap – June 20, 2016

  • German PPI m/m: 0.4% as expected vs. 0.1% previous
  • German PPI y/y: -2.7% vs. -2.8% expected, -3.1% previous

The forex calendar for Monday’s morning London session was rather sparse, but there was enough action to keep the session interesting, as forex traders turned mainly to risk sentiment amid easing Brexit jitters for direction.

Major Events/Reports:

BOJ Kuroda speaks – Haruhiko Kuroda, the mighty shogun of the BOJ, was speaking earlier, and he apparently acknowledged that the BOJ failed in its mission to push Japan’s inflation up to 2% within two years, saying that “Japan is still halfway through toward achieving the 2% price target.”

However, he did say that the BOJ doesn’t need to “change [its] commitment to achieving the 2% price target at the earliest possible time.” Kuroda also defended the BOJ’s decision to introduce negative interest rates, saying that they have a “positive impact on the real economy.” Finally he said that the BOJ “won’t hesitate to take additional easing steps if needed,” reiterating his statement during the BOJ press conference.

Risk-taking continues – The risk-on sentiment from the earlier Asian session spilled over into the European markets, with the Pan-European FTSEurofirst 300 up by an amazing 3.66% to 1,326.93, the blue-chip Euro Stoxx 50 up by a very solid 3.63% to 2,946.00, the U.K. FTSE 100 up by 3.22% to 6,215.00, and the DAX up by 3.43% to 9,961.50 by the close of the morning London session.

It also looks like risk-taking will continue in the U.S. session since the S&P 500 futures index was up by 1.32% to 2,086.25 while the Nasdaq futures index was up by 1.33% to 4,417.62.

Market analysts are attributing the risk-on mood to easing Brexit jitters after several polls showed a swing in voting sentiment which favored the “remain” camp.

I noted in my most recent Top Forex Market Movers of the Week that it remained to be seen if the unfortunate death of the anti-Brexit Labour MP and the media’s intensive coverage of the said event would have a significant effect on voting intentions. Well, it looks like we are seeing the effects now.

Commodities climb higher – Most commodities extended their gains during the morning London session, with the copper up by 1.17% to $2.075 per pound and zinc up by 1.32% to $134.35 per kilogram. Oil benchmarks were also doing very well, with U.S. crude oil up by 1.61% to $49.34 per barrel and Brent crude oil up by 1.75% to $50.03 per barrel by the end of the session.

Market analysts were pointing to the prevalence of risk appetite and a weakened U.S. dollar for the broad-based commodities rally. Speaking of risk appetite, one commodity that didn’t attract buyers was the safe-haven gold, since it was down by 0.95% to $1,282.55 per troy ounce by the end of the session.

Major Currency Movers:

GBP – Easing Brexit jitters and pound shorts taking profits off the table ahead of the Brexit referendum allowed the pound to reach new intraday highs against most of its forex rivals during the course of the morning London session.

GBP/USD was up by 67 pips (+0.46%) to 1.4634, GBP/CHF was up by 84 pips (+0.60%) to 1.4055, GBP/NZD was up by 121 pips (+0.59%) to 2.0604

EUR – The euro was grinding lower during the morning London session, and even ended up as the weakest currency of the session. There weren’t any apparent catalysts, but it’s likely that market players were abandoning the lower-yielding euro for riskier yet higher-yielding assets like European equities and commodities.

EUR/USD was down by 11 pips (-0.09%) to 1.1327, EUR/AUD was down by 29 pips (-0.19%) to 1.5206, EUR/GBP was down by 42 pips (-0.55%) to 0.7739

CAD – The commodities rally and another bout of risk-taking was very kind to the Loonie, so much so that it was the second-strongest currency during the morning London session, being second only to the mighty pound.

USD/CAD was down by 13 pips (-0.10%) to 1.2825, NZD/CAD was down by 22 pips (-0.25%) to 0.9106, EUR/CAD was down by 28 pips (-0.19%) to 1.4528

Watch Out For:

  • 12:30 pm GMT: Canada’s wholesale sales (0.5% expected, -1.0% previous)
  • 2:30 pm GMT: Australia’s CB leading index (0.1% previous)
  • 11:25 pm GMT: RBA Assistant Governor Guy Debelle will give a speech

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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