London Session Forex Recap – Sept. 2, 2016

  • Spanish unemployment change: 14.4K vs. 15.0K expected, -84.0K previous
  • Italy’s final Q2 GDP estimate q/q: unchanged at 0.0% as expected
  • Italy’s final Q2 GDP estimate y/y: unchanged at 0.8% as expected
  • U.K. construction PMI: 49.2 vs. 46.3 expected, 45.9 previous
  • Euro Zone PPI m/m: 0.1% vs. 0.6% previous
  • Euro Zone PPI y/y: -2.9% vs. -3.9% previous
  • U.S. NFP report coming up

Volatility was in short supply during the morning London session, as forex traders hunkered down for the upcoming NFP report.

Major Events/Reports:

NFP Friday! – Today is another NFP Friday. And as usual, both directional movement and volatility got sapped, with many currency pairs trading sideways, as forex traders sat on their hands ahead of the NFP report.

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

U.K. construction PMI – Like yesterday’s manufacturing PMI reading, the U.K.’s construction PMI reading came in better-than-expected, leaping higher from from July’s 85-month low of 45.9 to a three-month high of 49.2 in August. It’s still below the 50.0 stagnation level, though, so the reading isn’t really all that great.

According to commentary from the PMI report, new order volumes “moved closer to stabilisation,” which “contributed to a renewed rise in staffing levels across the construction sector and a rebound in business expectations for the next 12 months.” However, these came at the cost of a “steep acceleration in input cost inflation.”

Unfortunately for pound bulls, the better-than-expected reading didn’t spur any demand for the pound, since pound pairs were mostly trading sideways during the session.

Most commodities finally recover – After a broad-based, week-long losing streak, most commodities finally found some support and recovered some of their losses during the morning London session.

Oil was leading the charge:

  • U.S. WTI crude oil was up by 1.37% to $43.75 per barrel
  • Brent blend crude oil was up by 1.56% to $46.16 per barrel

Base metals were also well-supported:

  • Copper was up by 0.22% to $2.080 per pound
  • Tin was up by 0.72% to $19,222.50 per dry metric ton
  • Nickel was up by 0.35% to $9,962.50 per dry metric ton

Precious metals couldn’t attract enough buyers, though, likely because of the risk-on mood:

  • Gold was down by 0.09% to $1,315.95 per troy ounce
  • Silver was down by 0.22% to $18.902 per troy ounce

The recovery was probably due to profit-taking by the shorts. However, oil benchmarks were likely getting an extra boost from genuine demand after Russian President Vladimir Putin said in a Bloomberg interview that he may recommend another oil freeze deal with Saudi Deputy Crown Prince Mohammed bin Salman.

Moderate risk appetite – There were some signs of risk-taking during the morning London session, with most of the major European equity indices glowing gamma green.

  • The pan-European FTSEurofirst 300 was up by 0.65% to 1,359.91
  • The blue-chip Euro Stoxx 50 was up by 0.89% to 3,041.00
  • The U.K.’s FTSE 100 was up by 1.10% to 6,820.00
  • The DAX was up by 0.30% to 10,565.50

U.S. equity futures were also slightly in positive territory ahead of the NFP report:

  • The S&P 500 futures index was up by 0.06% to 2,168.75
  • The Nasdaq futures index was up by 0.17% to 4,785.50

Some market analysts attributed the risk-on mood to positive reports for pharmaceuticals and utilities while other market analysts pointed to the commodities rally, particularly the rise in oil prices.

Major Currency Movers:

AUD & NZD – The commodities rally and risk-friendly environment during the morning London session gave the higher-yielding Aussie and Kiwi a little boost.

AUD/USD was up by 17 pips (+0.23%) to 0.7557, AUD/JPY was up by 7 pips (+0.09%) to 78.22, AUD/CHF was up by 8 pips (+0.10%) to 0.7402

NZD/USD was up by 23 pips (+0.32%) to 0.7301, NZD/CHF was up by 14 pips (+0.19%) to 0.7151, NZD/JPY was up by 13 pips (+0.18%) to 75.57

USD – There weren’t any direct catalysts other than the risk-on mood, but the Greenback was showing some signs of weakness ahead ahead of the NFP report. Heck, the Greenback even lost out to its fellow safe-havens.

USD/JPY was down by 14 pips (-0.14%) to 103.50, USD/CHF was down by 12 pips (-0.13%) to 0.9794, USD/CAD was down by 13 pips (-0.10%) to 1.3093

Watch Out For:

  • 12:30 pm GMT: U.S. non-farm payrolls (180K expected, 255K 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, 0.3% previous)
  • 12:30 pm GMT: U.S. trade balance (-$43.0B expected, -$44.5B previous)
  • 12:30 pm GMT: Canada’s trade balance (-$3.2B expected, -$3.6B previous)
  • 12:30 pm GMT: Canada’s labor productivity (0.2% expected, 0.4% previous)
  • 2:00 pm GMT: U.S. factory orders (2.1% expected, -1.5% previous)

Asian Session Forex Recap

U.S. Session Forex Recap

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