London Session Forex Recap – August 5, 2016

  • German factory orders m/m: -0.4% vs. 0.5% expected, 0.1% previous
  • German factory orders y/y: -3.1% vs. -1.5% expected, -0.2% previous
  • French trade balance: -€3.4B vs. -€3.9B expected, =€2.8B previous
  • French current account: -€0.6B vs. -€0.3B previous
  • U.K. Halifax HPI m/m: -1.0% vs. -0.2% expected, 1.3% previous
  • U.K. Halifax HPI y/y: 8.4% vs. 8.5% expected, 8.4% previous
  • Italian industrial production m/m: -0.4% vs. 0.3% expected, -0.6% previous
  • U.S. NFP report and Canadian jobs report coming up

It was relatively quiet in the forex front. Trading conditions tightened and directional movement was limited during the morning London session, as forex traders hunkered down for the NFP report. There was some risk-taking, though, which kept the Aussie and the Kiwi supported. The pound, meanwhile, recovered a bit from yesterday’s fall.

Major Events/Reports:

NFP Friday! – Today is another NFP Friday. And and usual, both directional movement and volatility got sapped, with many currency pairs trading sideways or ending the session flat. The tight trading conditions were likely due to forex traders hunkering down for the upcoming NFP report. Still, there were a few currencies that were clearly on the move, which I’ll be pointing out later.

By the way, if you’re planning to trade the July NFP report and need to get up to speech, then make sure read up on Forex Gump’s Forex Preview for here.

BOE Broadbent in favor of more cuts – BOE Deputy Guv’nah Ben Broadbent said in a statement earlier that he is in favor of further rate cuts. To be more specific, Broadbent said that: “The minutes said there was a majority that expected to cut interest rates again were the economy to unfold in line with forecasts, and yes, I was one of the majority.”

However, Broadbent also said that monetary policy can only do so much, saying that “There are limits to what monetary policy, indeed any demand-management policy, can do — by that I mean conventional fiscal policy as well — to offset what is a structural effect on the economy.”

BOE Carney speaks – BOE Guv’nah Mark Carney was in a radio interview earlier today. And while he expressed concern about the U.K.’s economy, particularly the labor market, he also assured his listeners that “We’re not going through the same experience that the economy went through in 2008/9/10/11/12, when it was tough.”

Carney also added that “People should not worry about the supply of credit, this isn’t after the global financial crisis, this isn’t during the euro crisis – this is a modern financial sector that is working.”

Halifax HPI slides in July – The house price index (HPI) compiled by the Halifax Bank of Scotland was released earlier, and it wasn’t too good.

The monthly reading declined by 1.0%, which is much larger than the expected 0.2% decline. The current decline also mostly offsets the 1.3% increase from the previous month. Meanwhile, the annual reading was 8.4%, which is the same as last time and a one-year low.

These readings imply that the U.K.’s housing market is cooling down. However, Halifax Housing Economist Martin Ellis said that it still “remains too early to determine if there has been any impact on the housing market as a result of June’s EU referendum result.”

Risk-taking continues – The looming NFP report may have subdued the forex market, but it didn’t faze other markets too much since European equity indices were in the green.

The pan-European FTSEuorofirst 300 was up by 0.28% to 6,759.00, the blue-chip Euro Stoxx 50 was up by 0.58% to 2,943.00, the U.K.’s FTSE 100 was up by 0.35% to 6,763.70, and the DAX was up by 0.29% to 10,258.00.

U.S. equity futures were also slightly up, with the S&P 500 futures index up by 0.25% to 2,164.75 and the Nasdaq futures index up by 0.23% to 4,754.88.

Market analysts pointed to yesterday’s BOE decision, as well as positive earnings reports for the overall upbeat mood.

Major Currency Movers:

GBP – Despite the disappointing Halifax HPI readings and dovish rhetoric from BOE Broadbent, the pound just kept on grinding higher during the session. This was likely due to profit-taking by pound shorts after the pound’s dive yesterday.

GBP/USD was up by 39 pips (+0.30%) to 1.3166, GBP/CHF was up by 39 pips (+0.31%) to 1.2815, GBP/JPY was up by 41 pips (+0.31%) to 133.05

AUD & NZD – The general risk-on mood kept the Aussie and the Kiwi supported during the course of the morning London session.

AUD/USD was up by 9 pips (+0.12%) to 0.7657, AUD/JPY was up by 10 pips (+0.12%) to 77.38, AUD/CAD was up by 13 pips (+0.13%) to 0.9976

NZD/USD was up by 12 pips (+0.16%) to 0.7211, NZD/CHF was up by 11 pips (+0.16%) to 0.7018, NZD/JPY was up by 12 pips (+0.17%) to 72.87

Watch Out For:

  • 12:30 pm GMT: U.S. non-farm payrolls (180K expected, 287K previous)
  • 12:30 pm GMT: U.S. jobless rate (4.8% expected, 4.9% previous)
  • 12:30 pm GMT: U.S. average hourly earnings (0.2% expected, 0.1% previous)
  • 12:30 pm GMT: U.S. trade balance (-$43.0B expected, -$41.1B previous)
  • 12:30 pm GMT: Canadian employment change (10.0K expected, -0.7K previous)
  • 12:30 pm GMT: Canadian jobless rate (6.9% expected, 6.8% previous)
  • 12:30 pm GMT: Canadian trade balance (-$2.84B expected, -$3.28B previous)
  • 2:00 pm GMT: Canadian Ivey PMI (51,7 previous)
  • 7:00 pm GMT: U.S. consumer credit (15.5B expected, 18.6B previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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