London Session Forex Recap – Sept. 20, 2016

  • German PPI m/m: -0.6% vs. 0.0% expected, 0.2% previous
  • German PPI y/y: 1.9% vs. -1.6% expected, -2.0% previous
  • Swiss trade balance: CHF 3.02B vs. CHF 2.81B previous

Price action was rather wonky during the morning London session, since most of the major movers were on the move without any apparent catalysts.

Major Events/Reports:

Swiss economy to grow fasterAccording to Switzerland’s State Secretariat for Economic Affairs (SECO), the Swiss economy is expected to grow by 1.5% for all of 2016 on stronger exports. This is better than the June forecast of +1.4. In addition, the recent forecast is almost twice as fast as 2015’s +0.8% rate of expansion. Oh, for those who don’t remember, Switzerland’s economy suffered after the floor on the Swiss franc was removed caused Swiss exports to become less competitive.

Getting back on topic, the faster growth is not as broad-based as SECO wants. According ti SECO,  there “some areas like tourism and manufacturing are still finding it tough. But some like machinery, electronics and metals are doing somewhat better, so at the moment it looks like the franc shock has really bottomed out.”

Moreover, an actual Brexit could be a threat to Switzerland’s economy, but “there is a good chance that the negative economic effect of a Brexit will remain largely limited to the UK itself and will have only a moderate impact on Continental Europe and other regions around the world.”

Oil clobbered – Oil benchmarks extended their losses during the morning London session. Market analysts blamed oil’s continued weakness to the build-up in U.S. oil inventories as well as comments from Venezuelan officials that the oil market is still oversupplied by 10% or so.

  • U.S. WTI crude oil was down by 1.09% to $43.38 per barrel
  • Brent blend cure oil was down by 1.01% to $45.48 per barrel

Moderate risk-taking – Risk appetite was banished during yesterday’s U.S. session and today’s earlier Asian session, but signs of risk-taking activity finally returned in Europe. Most of the major European equity indices actually started the session flat or in the red, but they eventually recovered. Market analysts couldn’t pinpoint the reason for the later recovery in risk sentiment, though.

  • The pan-European FTSEurofirst 300 was up by 0.25% to 1,345.65
  • The blue-chip Euro Stoxx 50 was up by 0.40% to 2,982.00
  • The U.K.’s FTSE 100 was up by 0.60% to 6,854.30
  • The DAX was up by 0.66% to 10,441.90

U.S. equity futures were also moderately in the green:

  • S&P 500 futures were up by 0.36% to 2,140.75
  • Nasdaq futures were up by 0.34% to 4,810.62

Major Market Movers:

USD – The Greenback weakened across the board during the late Asian session and just before the London session opened. It then spent the duration of the morning London session by clawing its way higher against its peers to end as the best-performing currency of the session. For the day, however, Greenback pairs are mixed.

EUR/USD was down by 15 pips (-0.14%) to 1.1185, USD/CAD was up by 33 pips (+0.25%) to 1.3223, USD/JPY was up by 35 pips (+0.35%) to 101.89

GBP – Pound pairs slumped across the board from the get-go, even though there were no apparent catalysts. Maybe this is a continuation of last week’s theme?

GBP/USD was down by 85 pips (-0.65%) to 1.2973, GBP/JPY was down by 41 pips (-0.31%) to 132.19, GBP/NZD was down by 118 pips (-0.66%) to 1.7657

CHF – The Swissy started the session on a strong footing, probably because of the early risk aversion and/or the upgraded growth forecast for the Swiss economy. However, demand for the Swissy began to fade when risk appetite began to return. The Swissy was able to hold onto most of its gains, though, which is why it was the second strongest currency after the Greenback.

EUR/CHF was down by 17 pips (-0.15%) to 1.0942 with 1.0929 as session low, GBP/CHF was down by 84 pips (-0.66%) to 1.2692 with 1.2668 as session low, AUD/CHF was down by 10 pips (-0.13%) to 0.7384 with 0.7373 as session low

Watch Out For:

  • 12:30 pm GMT: U.S. housing starts (1.19M expected, 1.21M previous)
  • 12:30 pm GMT: U.S. building permits (1.17M expected, 1.14M previous)
  • 4:50 pm GMT: BOC Governor Stephen Poloz has a speech
  • Dairy auction currently underway (+7.7% previous); auction usually ends at around 2:00 pm GMT

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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