London Session Forex Recap – July 13, 2016

  • German WPI m/m: 0.6% vs. 0.9% previous
  • German WPI y/y: -1.5% vs. -2.3% previous
  • French final HICP m/m: 0.1% as expected, 0.2% previous
  • French final HICP y/y: unchanged at 0.3% as expected
  • Chinese trade balance: $48.11B vs. $46.64B expected, $49.98B previous
  • Chinese exports y/y: -4.8% vs. -4.1% expected, -4.1% previous
  • Chinese imports y/y: -8.4% vs. -5.0% expected, -0.4% previous
  • Euro Zone industrial production m/m: -1.2% vs. -0.8% expected, 1.4% previous
  • Euro Zone industrial production y/y: 0.5% vs. 1.3% expected, 2.2% previous

Today’s morning London session was a risk-friendly one, and most commodities staged another rally to boot, so the Kiwi and the Aussie made a comeback while the yen got slapped around. The euro and the pound, meanwhile, were mixed.

Major Events/Reports:

Chinese trade dataChina’s trade surplus narrowed in June to US$48.11 billion from US49.98 billion. It’s still wider than the expected $46.64 billion figure, though. However, China’s exports dropped by 4.8% year-on-year, which is the third consecutive drop and bigger than the expected 4.1% fall. Imports also slumped by 8.4% year-on-year, which is a more painful than the expected 5% drop and also marks the 20th consecutive slide in imports.

Japan downgrades forecasts – The Japanese government announced earlier that it downgraded its 2016 fiscal GDP projections from 1.7% to 0.9% while cutting down its 2016 inflation projection from 1.2% to just 0.4%, which likely stoked expectations of further stimulus.

Moderate appetite for risk – Risk-taking persisted into the morning London session, albeit not as rampant as yesterday’s session, with the pan-European FTSEurofirst 300 up by 0.33% to 1,334.79, the blue-chip, Euro Stoxx 50 up by 0.29% to 2,944.00 the U.K.’s FTSE 100 up by 0.23% to 6,696.00, and the DAX up by 0.29% to 9,993.00. U.S. equity futures were also supported, with S&P 500 futures index up by 0.08% to 2,147.50 and the Nasdaq futures index up by 0.16% to 4,577.00.

The moderate signs of risk appetite was due to expectations of further stimulus from the ECB and the BOE, according to market analysts.

Oil falls, other commodities fly – The overall risk-on mood, together with a relatively weaker U.S. dollar, was supporting commodities, according to market analysts, even though China’s trade report showed that imports of commodities slowed.

The base metal copper was up by 1.36% to $2.243 per pound while the precious metal gold was up by 0.20% to $1,338.00 per troy ounce, despite the prevailing risk-on environment.

Oil wasn’t doing too well, though, with U.S. crude oil down by 1.28% to $46.20 per barrel and Brent blend crude oil down by 1.61% to $47.69per barrel. Market analysts blamed the slide in oil prices to the International Energy Agency’s (IEA) warning that the oil glut will persist, as well as expectations that U.S. crude oil inventories will rise. Basically, market analysts are blaming oversupply jitters.

Major Currency Movers:

AUD & NZD – The Kiwi and the Aussie were really dishing out the pain against their forex rivals, thanks to the prevalence of risk appetite and the general risk-friendly environment. Between the two of them, the Kiwi clearly had the upper hand. The Kiwi even ended up as the best-performing currency of the session.

NZD/USD was up by 51 pips (+0.71%) to 0.7299, NZD/JPY was up by 78 pips (+1.04%) to 76.37, NZD/CHF was up by 28 pips (+0.40%) to 0.7188

AUD/USD was up by 36 pips (+0.49%) to 0.7625, AUD/JPY was up by 66 pips (+0.84%) to 79.80, AUD/CHF was up by 15 pips (+0.20%) to 0.7511

CAD – The Loonie showed signs of weakness, even though it’s a comdoll. This was likely due to falling oil prices during the session and/or caution ahead of the BOC’s interest rate decision and presser for later.

USD/CAD was down by 28 pips (-0.22%) to 1.3037, AUD/CAD was up by 27 pips (+0.28%) to 0.9943, NZD/CAD was up by 46 pips (+0.49%) to 0.9517

JPY – The risk-on vibes and the Japanese government’s downgrades, which likely spurred expectations of further stimulus, meant that the yen got the boot yet again.

USD/JPY was up by 36 pips (+0.35%) to 104.63, EUR/JPY was up by 55 pips (+0.49%) to 115.87, GBP/JPY was up by 45 pips (+0.33%) to 138.93

GBP – The pound had a mixed performance during the morning London session, but it showed mostly weakness. There were no direct catalysts for the pound’s weakness, but it’s possible that some forex traders were just taking some profits off the table ahead of the BOE statement tomorrow.

GBP/USD was down by 5 pips (-0.04%) to 1.3276, GBP/NZD was down by 129 pips (-0.70%) to 1.8188, GBP/AUD was down by 82 pips (-0.47%) to 1.7414

Watch Out For:

  • 12:30 pm GMT: U.S. import price index (0.5% expected, 1.4% previous)
  • 2:00 pm GMT: BOC interest rate decision and statement (unchanged at 0.5% expected)
  • 2:30 pm GMT: U.S. crude oil inventories
  • 3:15 pm GMT: BOC press conference
  • 6:00 pm GMT: U.S. Federal budget ($24B expected, -$52.5B previous)
  • 6:00 pm GMT: U.S. Fed’s Beige Book will be released
  • 10:30 pm GMT: Business NZ manufacturing index (57.1 previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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