London Session Forex Recap – August 10, 2016

  • French industrial production m/m: -0.8% vs. 0.1% expected, -0.5% previous
  • French manufacturing production m/m: -1.2% vs. 0.2% expected, 0.1% previous
  • French manufacturing production y/y: -1.5% vs. 0.1% expected, 0.7% previous
  • RBNZ monetary policy decision and statement later

The search for higher-yield and the commodities rally sent both the Aussie and the Kiwi higher during the session. The Greenback, meanwhile, continued to lose out against all its peers.

Major Events/Reports:

BOE report on business conditions – The BOE released its Agents’ summary of business conditions for the late June to late July period earlier. And, well, it was bad overall but most businesses remained upbeat at least.

Consumer spending eased further thanks in part to the Brexit referendum. Although the report also acknowledged that “unseasonal weather likely to have been a significant factor.”

Business services growth as well as construction output weakened some more. But on a more upbeat note, manufacturing output “had continued to increase gently on a year ago.” The increase was partly due to a weaker pound, which made British exports more competitive.

As for investment intentions, “Most businesses were not making immediate changes to capital spending plans, but a significant minority were reviewing their risk appetite and some were deferring decisions.”

Despite the optimistic view of most business, employment intentions, particularly in the service sector, “had been scaled back, with contacts now expecting flat employment over the next six months.”

Rumors from Japan – According to unnamed sources exclusively interviewed by Reuters, the BOJ “has already prepared a preliminary outline of a ‘comprehensive’ assessment of its policies due next month.”

The outline apparently didn’t include additional easing measures yet, but “the general tone would suggest that a tapering of the BOJ’s massive stimulus program is unlikely,” according to Reuters.

Risk aversion strikes back – Risk aversion finally staged a comeback, pushing most of the major European equity indices into negative territory.

  • The pan-European FTSEurofirst 300 was down by 0.33% to 1,353.45
  • The blue-chip Euro Stoxx 50 was down by 0.22% to 3,022.00
  • The U.K.’s FTSE 100 was down by 0.22% to 6,836.00
  • The DAX was down by 0.44% to 10,645.50

There was no clear reason for the risk-off mood, but it may have been due to profit-taking after four to five days of gains.

Commodities charge higher – Commodities, metals in particular, were well in the green during the morning London session.

Precious metals got some love:

  • Gold was up by 0.85% to $1,358.15 per troy ounce
  • Silver was up by 2.52% to $20.350 per troy ounce

Base metals were particularly in high demand:

  • Copper was up by 1.91% to $2.191 per pound
  • Nickel was up by 1.58% to $10,952.50 per dry metric ton
  • Zinc was up by 1.49% to $2,306.25 per dry metric ton
  • Tin was up by 1.01% to $18,587.50 per dry metric ton

Oil wasn’t doing too well, though:

  • U.S. WTI crude oil was down by 0.51% to $42.55 per barrel
  • Brent crude oil was down by 0.16% to $44.91 per barrel

Market analysts couldn’t pinpoint the catalyst for the broad-based commodities rally. The rally was likely due to bargain buying because of the Greenback’s recent weakness, though. Oil’s weakness, meanwhile, was likely due to earlier reports about Saudi Arabia frantically pumping out a record number of barrel per day to meet an expected increase in seasonal demand during summer.

Major Currency Movers:

USD – The Greenback continued to bleed out during the morning London session. There weren’t any direct catalysts, so the Greenback’s weakness was likely due to fading optimism on the possibility of a rate hike within the year. Well, that’s what some market analysts are saying anyway.

USD/CAD was down by 65 pips (-0.50%) to 1.3010, USD/JPY was down by 28 pips (-0.28%) to 101.16, USD/CHF was down by 37 pips (-0.38%) to 0.9761

AUD & NZD – The higher-yielding Aussie and the Kiwi just shrugged off the risk-off mood during the morning London session. Demand for the two comdolls was likely due to the search for higher yet relatively safe yield, as well as the commodities rally.

It’s kinda strange that demand for the Kiwi was also pretty strong, though, given that the RBNZ statement is coming up. Normally, volatility tends to tighten up. Anyhow, Forex Gump has a nifty write-up on the 3 Things You Should Know About the Upcoming RBNZ Statement. You can read it here.

AUD/USD was up by 49 pips (+0.64%) to 0.7740, AUD/JPY was up by 28 pips (+0.36%) to 78.30, AUD/CHF was up by 19 pips (+0.26%) to 0.7556

NZD/USD was up by 58 pips (+0.81%) to 0.7253, NZD/JPY was up by 39 pips (+0.54%) to 73.37, NZD/CHF was up by 31 pips (+0.43%) to 0.7080

Watch Out For:

  • 2:00 pm GMT: U.S. JOLTS job openings (5.52M expected, 5.50M previous)
  • 2:30 pm GMT: U.S. crude oil inventories (-1.3M expected, 1.4M previous)
  • 6:00 pm GMT: U.S. federal budget balance (-119.0B expected, 6.3B previous)
  • 9:00 pm GMT: RBNZ monetary policy decision and statement (OCR expected to be cut from 2.25% to 2.00%)
  • 10:00 pm GMT: RBNZ press conference
  • 10:45 pm GMT: New Zealand’s FPI (0.4% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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