London Session Forex Recap – August 8, 2016

  • German industrial production m/m: 0.8% vs. 0.9% expected, -1.3% previous
  • German industrial production y/y: 0.5% vs. 0.6% expected, -0.4% previous
  • French BOF business sentiment: 96 vs. 97 previous
  • Swiss CPI m/m: -0.4% vs. -0.5% expected, 0.1% previous
  • Swiss CPI y/y: -0.2% vs. -0.3% expected, -0.4% previous
  • Euro Zone Sentix indicator: 4.2 vs. 3.0 expected, 1.7 previous
  • SNB sight deposits (domestic): CHF 437,319M vs. CHF 435,006M previous

Risk-taking was the name of the game during Monday’s morning London session, so the higher-yielding Aussie and Kiwi were in demand while the yen and the Swissy got dumped.

Major Events/Reports:

SNB sight deposits rise – The value of sight deposits of domestic Swiss banks rose from CHF 435,006 million to CHF 437,319 million during the week ending on August 5. This increase implies that the SNB may have been sneakily weakening the Swissy again and helps to explain why the Swissy was a main loser last week.

For the newbies out there, sight deposits of domestic banks are part of the monetary base and are used by the SNB for financing currency purchases (*cough* currency manipulation *cough*).

Risk-on vibes persist – The risk-on mood from the earlier Asian session carried over into the morning London session, with most European equity indices in the green.

The pan-European FTSEurofirst 300 was up by 0.23% to 1,347.95, the blue-chip Euro Stoxx 50 was up by 0.88% to 2,997.00, the U.K.’s FTSE 100 was up by 0.10% to 6,800.00, and the DAX was up by 0.90% to 10,461.00.

The safe-haven gold,was also down by 0.55% to $1,336.95 per troy ounce while U.S. equity futures were hinting that the risk-on vibes will spill over into the U.S. session, since the S&P 500 futures index was up by 0.21% to 2,181.25 while the Nasdaq futures index was up by 0.29% to 4,797.00.

Market analysts attributed the prevalence of risk appetite to last week’s blowout NFP report.

OPEC on oil – Mohammed Al Sada, Qatar’s energy minister and the current president of OPEC, said in an earlier statement that:

“Expectation of higher crude oil demand in the third and fourth quarters of 2016, coupled with decrease in availability, is leading the analysts to conclude that the current bear market is only temporary and oil price would increase during later part of 2016.”

This rhetoric about the oil slide being “temporary” caused oil to rally hard, with U.S. WTI crude oil up by 1.56% to $42.45 per barrel and Brent blend crude oil up by 1.38% to $44.88 per barrel.

Major Currency Movers:

Comdolls – The prevalence of risk appetite spurred demand for the higher-yielding Kiwi and Aussie. The oil rally, meanwhile, stoked demand for the Loonie. And among the comdolls, the Aussie emerged as the best-performing currency of the session. The higher demand for the Aussie was likely due to weaker demand for the Kiwi ahead of the RBNZ statement and hesitation to load up on the Loonie given last week’s bad data.

AUD/USD was up by 28 pips (+0.39%) to 0.7637, AUD/CAD was up by 20 pips (+0.20%) to 1.0046, AUD/NZD was up by 19 pips (+0.18%) to 1.0715

NZD/USD was up by 13 pips (+0.19%) to 0.7127, NZD/JPY was up by 31 pips (+0.43%) to 72.99, NZD/CHF was up by 23 pips (+0.34%) to 0.6996

USD/CAD was down by 23 pips (-0.18%) to 1.3155, GBP/CAD was down by 20 pips (-0.12%) to 1.7177, EUR/CAD was down by 22 pips (-0.16%) to 1.4581

JPY & CHF – The risk-friendly environment during the morning London session was a toxic environment for the safe-havens, particularly the yen and the Swissy. The Greenback’s performance, meanwhile, was a bit mixed, probably because of positive sentiment for the Greenback due to the strong NFP report.

USD/JPY was up by 21 pips (+0.20%) to 102.39, GBP/JPY was up by 37 pips (+0.28%) to 133.72, CAD/JPY was up by 31 pips (+0.40%) to 77.84

USD/CHF was up by 12 pips (+0.13%) to 0.9817, EUR/CHF was up by 15 pips (+0.14%) to 1.0881, GBP/CHF was up by 24 pips (+0.19%) to 1.2819

Watch Out For:

  • 12:30 pm GMT: Canadian building permits (1.5% expected, -1.9% previous)
  • 2:00 pm GMT: U.S. labor market conditions (-1.9% previous)
  • 11:00 pm GMT: U.K. BRC retail sales monitor (-0.5% previous)

See also:

Asian Session Forex Recap

Last Week’s Top Movers

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