London Session Forex Recap – Sept. 14, 2016

  • French final HICP m/m: downgraded from 0.4% to 0.3%
  • French final HICP y/y: steady at 0.4% as expected
  • Chinese new yuan loans: CNY 948.7B vs. CNY 750.0B expected, CNY 463.6B previous
  • U.K. claimant count change: 2.4K vs. 1.8K expected, -3.6K previous
  • U.K. average earning index (no bonus): 2.1% vs. 2.2% expected, 2.3% previous
  • U.K. average earning index (w/ bonus): 2.3% vs. 2.1% expected, 2.5% previous
  • U.K. jobless rate: steady at 4.9% as expected
  • Euro Zone industrial production m/m: -1.1% vs. -1.0% expected, 0.8% previous
  • Euro Zone industrial production y/y: -0.5% vs. -0.8% expected, 0.7% previous
  • Swiss ZEW economic survey: 2.7 vs. -2.8 previous

There were some rather wonky price action during today’s morning London session, since the safe-havens were in demand despite the rally in both commodities and European equities.

Major Events/Reports:

Net positive U.K. jobs report – The jobless rate in the U.K. held steady at the multi-year low of 4.9% during the three months to July. At the same time, the employment rate held steady at 74.5%, which is “the joint highest since comparable records began in 1971.” Average hourly earning also grew by 2.3%, which is faster than the expected 2.1% increase. In addition, the previous reading was upgraded from a 2.4% increase to 2.5%, which is great.

Overall, the jobs report was net positive. The only dark spot was the 2.4K increase in the number of people that were applying for unemployment-related benefits in August, since that’s more than the expected 1.8K increase.

Commodities sally forth – After slumping yesterday, commodities were broadly in recovery mode today.

Base metals were up, with copper leading the way:

  • Copper was up by 1.26% to $2.128 per pound
  • Aluminum was up by 0.35% to $1,1,568.75 kilogram
  • Tin was up by 0.72% to $19,127.50 per dry metric ton

Base metals got some buyers, even though risk sentiment recovered:

  • Gold was up by 0.22% to $1,326.65 per troy ounce
  • Silver was up by 0.86% to $19.138 per troy ounce

Oil benchmarks also rose after yesterday’s plunge:

  • U.S. WTI crude oil was up by 0.69% to $45.21 per barrel
  • Brent blend crude oil was up by 0.51% to $47.34 per barrel

According to analysts, the commodities rally, especially the rise in copper prices, was supposedly due to upbeat data from China. It also helped oil benchmarks that the American Petroleum Institute (API) reported a smaller than expected build-up in U.S. oil inventories, which raised expectations that the government data for later will have similar numbers.

Risk-on! – Yesterday’s broad-based European equities rally was ended when risk aversion made a comeback during the U.S. session/late London session, thanks to the rout in oil prices. However, European risk-takers were undeterred, since they gave it another go, and so most European equity indices were pushed into the green.

  • The pan-European FTSEurofirst 300 was up by 0.41% to 1,338.32
  • The blue-chip Euro Stoxx 50 was up by 0.15% to 2,980.00
  • The U.K.’s FTSE 100 was up by 0.39% to 1,338.05
  • The DAX was up by 0.42% to 10,430.00

And there’s a bigger chance that the risk-on mood is here to stay since U.S. equity futures were also in positive territory.

  • S&P 500 futures were up by 0.14% to 2,125.25
  • Nasdaq futures were up by 0.22% to 4,734.25

Market analysts are highlighting that mining companies were leading the way, so the recovery in risk sentiment appears to be driven by the rise in commodity prices, especially base metals.

Major Market Movers:

JPY & CHF – The risk-on mood may have been good for European equities, but that didn’t appear to be the case in the forex market since the safe-haven currencies were actually (and strangely) winning out against their peers. Perhaps we’re seeing some preemptive action before tomorrow’s MPC decision?

Anyhow, the yen was in particularly high demand, followed by the Swissy. The Greenback, meanwhile, was the least loved and had a more mixed price action.

USD/JPY was down by 50 pips (-0.48%) to 102.75, CHF/JPY was down by 58 pips (-0.75%) to 78.75, NZD/JPY was down by 41 pips (-0.55%) to 74.74

USD/CHF was down by 7 pips (-0.07%) to 0.9754, CAD/CHF was down by 32 pips (-0.44%) to 0.7398, EUR/CHF was down by 19 pips (-0.18%) to 1.0946

GBP – The pound started the session on a weak footing after a mostly bullish run during the earlier Asian session. The pound then got a bullish boost when the overall positive jobs report was released. However, there weren’t enough bulls to keep the pound supported, and so the pound continued to weaken against its forex rivals.

GBP/USD was down by 41 pips (-0.31%) to 1.3184, GBP/JPY was down by 109 pips (-0.80%) to 135.48, GBP/CHF was down by 49 pips (-0.39%) to 1.2861

Watch Out For:

  • 12:30 pm GMT: U.S. import prices (-0.1% expected, 0.1% previous)
  • 2:30 pm GMT: U.S. crude oil inventories (2.8M expected, -14.5M previous)
  • 10:30 pm GMT: New Zealand’s BNZ manufacturing index (55.8 previous)
  • 10:45 pm GMT: New Zealand’s Q2 GDP (1.1% expected, 0.7% previous); read Forex Gump’s trading guide here

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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