London Session Forex Recap – Sept. 12, 2016

  • Italian quarterly jobless rate: 11.5% as expected vs. 11.6% previous

There was a three-way race between the safe-haven currencies, thanks to another intense bout of risk aversion during the session. However, the pound later joined the race, and even managed to finish second after the yen.

Major Events/Reports:

Lots of risk aversion to start the week – Risk appetite was still nowhere in sight during the first European session of the week, with most of the major European equity indices deep in negative territory:

  • The pan-European FTSEurofirst 300 was down by 1.61% to 1,338.03
  • The blue-chip Euro Stoxx 50 was down by 1.91% to 2,994.00
  • The U.K.’s FTSE 100 was down by 1.43% to 6,680.10
  • The DAX was down by 1.94% to 10,368.50

U.S. equity futures also got whupped, so the risk-off vibes may also carry over into the upcoming U.S. session:

  • The S&P 500 futures were down by 0.58% to 2,103.75
  • Nasdaq futures were down by 0.77% to 4,631.88

Market analysts blamed the intense and broad-based risk aversion during the morning London session to higher expectations of a Fed rate hike, as well as growing concerns that the major central banks won’t provide additional stimulus.

Commodities routed – Commodities repeated last Friday’s price action by beating another hasty and broad-based retreat during today’s morning London session.

Base metals got bushwhacked:

  • Copper was down by 0.69% to $2.078 per pound
  • Aluminum was down by 0.60% to $1,567.25 per kilogram
  • Nickel was down by 2.78% to $10,065.00 per dry metric ton

Risk aversion didn’t give precious metals any support:

  • Gold was down by 0.44% to $1,328.60 per troy ounce
  • Silver was down by 2.82% to $18.822 per troy ounce

Oil benchmarks continued to sink deeper into the red:

  • U.S. WTI crude oil was down by 1.85% to $45.03 per barrel
  • Brent blend crude oil was down by 1.71% to $47.19 per barrel

The commodities selloff was likely due to the recent strengthening of the Greenback, which made globally-traded commodities that are priced in U.S. dollars relatively more expensive.

Major Currency Movers:

JPY – Thanks to the prevalence of risk aversion during the session, there was a three-way race between the safe-haven currencies (USD. JPY, and CHF). However, the Greenback pulled out of the race about halfway through the session. Demand for the yen and the Swissy persisted, with the yen ultimately gaining the upper hand while the Swissy was pushed into third place after the pound joined the race.

USD/JPY was down by 64 pips (-0.63%) to 101.80, CHF/JPY was down by 68 pips (-0.65%) to 104.50, AUD/JPY was down by 61 pips (-0.79%) to 76.51

GBP – It looked like the pound was just going with the flow of risk sentiment at first, since it initially lost ground to the safe-havens while advancing against the comdolls. However, the pound later came into its own, and even managed to end up as the second-strongest currency of the session. There was no clear reason for the broad-based demand for the pound during the second half of the session, though.

GBP/USD was up by 14 pips (+0.11%) to 1.3284, GBP/CHF was up by 15 pips (+0.11%) to 1.2937, GBP/CAD was up by 68 pips (+0.40%) to 1.7404

Watch Out For:

  • 1:30 pm GMT: U.K. CB leading index (-0.3% previous)
  • 5:00 pm GMT: Fed Governor Lael Brainard is scheduled to speak
  • 10:30 pm GMT: RBA Assistant Governor Christopher Kent has a speech

See also:

Asian Session Forex Recap

Last Week’s Top Forex Movers

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