London Session Forex Recap – Sept. 5, 2016

  • Spanish services PMI: 56.0 vs. 55.1 expected, 54.1 previous
  • Italian services PMI: 52.3 vs. 51.8 expected, 52.0 previous
  • French final services PMI: revised to 52.3 vs. steady at 52.0 expected
  • German final services PMI: revised tp 51.7 vs. steady at 53.3 expected
  • Euro Zone final services PMI: revised to 52.8 vs. steady at 53.1 expected
  • Euro Zone final composite PMI: revised to 52.9 vs. steady at 53.3 expected
  • U.K. services PMI: 52.9 vs. 50.0 expected, 47.4 previous
  • Euro Zone Sentix indicator: 5.6 vs. 5.0 expected, 4.2 previous
  • Euro Zone retail trade y/y: 2.9% vs. 1.8% expected, 1.7% previous

Despite the prevalence of risk appetite, the yen’s ascent continued during the morning London session. The pound meanwhile, got a boost from the upbeat services PMI report, but found sellers along the way.

Major Events/Reports:

U.K. services PMI – The U.K.’s services PMI reading from Markit/CIPS came in better-than-expected at 52.9 in August. The rebound from July’s 47.4 reading, a 5.5 point jump, “was the largest observed over the 20-year survey history.” However, new business growth remained weak, but “sufficiently strong to generate a rise in outstanding work at service providers for the first time in five months.”

Russian and Saudi oil pact – Oil benchmarks spiked hard to the upside earlier during the session after reports began to make the rounds that Russia and Saudi Arabia have signed a deal to research and recommend some measures that will hopefully stabilize the oil market.

This deal is in relation to last Friday’s Bloomberg interview with Russian President Vladimir Putin wherein Putin said that he may recommend another oil freeze deal with Saudi Deputy Crown Prince Mohammed bin Salman.

Oil benchmarks eventually gave back some of their gains after the initial spike, but they managed to keep most of their gains.

  • U.S. WTI crude oil was up by 2.38% to $45.20 per barrel
  • Brent blend crude oil was up by 1.41% to $47.49 per barrel

Some risk-taking to start the week – There was signs of moderate risk appetite during the first morning London session of the week, since most of the major European equity indices were in positive territory.

  • The pan-European FTSEurofirst 300 was up by 0.22% to 1,382.02
  • The blue-chip Euro Stoxx 50 was up by 0.20% to 3,087.00
  • The DAX was up by 0.21% to 10,705.90

Most market analysts were quick to attribute the upbeat mood to the oil rally.

Major Currency Movers:

JPY – Despite the risk-on vibes during the morning London session, the yen just plowed through its forex rivals to end up as the strongest currency of the session. The yen’s rise since the Asian session was likely due to BOJ Shogun Kuroda’s speech wherein he said that he does to not think there is a limit to monetary easing, but admitted that the BOJ has a limit on what it can do “in the sense that there are things that ‘cannot be done legally’ or ‘should not be done,’ such as directly underwriting government bonds and monetizing fiscal deficits.”

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

GBP – The pound jumped higher when the better-than-expected services PMI reading came out, but there was little follow-through buying. There was some follow-through selling, however, giving intraday pound traders some good two-way action.

GBP/USD was up by 15 pips (+0.11%) to 1.3323 with 1.3375 as session high, GBP/AUD was up by 40 pips (+0.23%) to 1.7553 with 1.7603 as session high, GBP/CHF was up by 23 pips (+0.17%) to 1.3039 with 1.3085 as session high

CAD – The Loonie was tracking oil prices during the session, so it ended up winning against most of its peers.

USD/CAD was down by 17 pips (-0.13%) to 1.2940, NZD/CAD was down by 31 pips (-0.32%) to 0.9463, AUD/CAD was down by 26 pips (-0.26%) to 0.9819

Watch Out For:

  • Potentially low liquidity due to Labor Day holiday in Canada and the U.S. today

Asian Session Forex Recap

Last Week’s Top Movers

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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