London Session Forex Recap – Sept. 21, 2016

  • U.K. public sector net borrowing: £10.1B vs. £10.5B expected, -£2.4B previous
  • FOMC statement and press conference later
  • RBNZ statement also for later

Despite the upcoming FOMC statement, there was price action aplenty during the session. And price action was being dictated by risk appetite for the most part. The yen’s overpowering strength was a clear exception, though.

Major Events/Reports:

BOJ press conference – BOJ Shogun Kuroda had a presser a couple of hours after the BOJ statement. And Kuroda admitted that it’s been more than three years since QQE was implemented, but inflation is still a long way away from the BOJ’s inflation target. However, “there’s absolutely no change to our [the BOJ’s] commitment to achieve 2 percent (inflation) at the earliest date possible.”

Kuroda also said that the BOJ’s new “QQE with Yield Curve Control” monetary policy framework is meant to address this. He then added that: “I’m confident we can succeed with our yield curve control.”

With regard to forward guidance, the BOJ obviously still has an easing bias. For instance, Kuroda said that “we will ease further when necessary.” Kuroda also said that: “I don’t think the BOJ has become cornered.”

Overall, everything that Kuroda said was already in the BOJ statement, so he didn’t really add anything new. And if you want the details on the BOJ’s “comprehensive assessment” as well as its new “QQE with Yield Curve Control” monetary policy framework, you can check out Forex Gump’s write-up here.

Risk-taking galore – Despite the FOMC statement looming over the horizon, risk sentiment was rather upbeat during the morning London session.

  • The pan-European FTSEurofirst 300 was up by 0.87% to 1,353.77
  • The blue-chip Euro Stoxx 50 was up by 1.28% to 3,008.00
  • The U.K.’s FTSE 100 was up by 0.41% to 6,859.00
  • The DAX was up by 1.14% to 10,512.60

U.S. equity futures were also well-supported.

  • S&P 500 futures were up by 0.41% to 2,139.75
  • Nasdaq futures were up by 0.52% to 4,823.62

Market analysts pointed out that banking shares were the main winners. And they attributed this to the BOJ’s decision to modify its monetary policy framework, as well as expectations that the Fed will keep rates steady later.

Major Market Movers:

USD – Volatility on Greenback pairs normally get sapped ahead of the FOMC statement. However, today was not a normal day, since the Greenback weakened across the board. Heck, the Greenback even ended up as the worst-performing currency of the session.

There were no clear catalysts for the Greenback’s broad-based weakness. However, it’s possible that forex traders are expecting the Fed to have some dovish hints, given the most recent U.S. economic developments.

USD/JPY was down by 130 pips (-1.27%) to 100.91, USD/CAD was down by 21 pips (-0.16%) to 1.3150, USD/CHF was down by 42 pips (-0.43%) to 0.9757

EUR – The rally in European equities weighed heavily on the lower-yielding euro. So much so that the euro ended up as the second weakest currency after the Greenback.

EUR/CHF was down by 40 pips (-0.37%) to 1.0988, EUR/NZD was down by 63 pips (-0.42%) to 1.5182, EUR/AUD was down by 55 pips (-0.37%) to 1.4671

JPY – The yen just shrugged off the risk-off vibes to end up as the strongest currency of the session. Market analysts attributed the yen’s strength to either profit-taking ahead of the FOMC statement or skepticism that the BOJ’s framework overhaul would be enough to get inflation back on track.

EUR/JPY was down by 137 pips (-1.22%) to 112.51, CAD/JPY was down by 88 pips (-1.13%) to 76.73, CHF/JPY was down by 89 pips (-0.85%) to 103.44

Watch Out For:

  • 12:30 pm GMT: Canadian wholesale sales (0.3% expected, 0.7% previous)
  • 1:00 pm GMT: CB’s Chinese leading index (0.7% previous)
  • 2:30 pm GMT: U.S. crude oil inventories (3.2M expected, -0.6M previous)
  • 6:00 pm GMT: FOMC federal funds rate decision and statement (steady at 0.50% expected)
  • 6:30 pm GMT: FOMC press conference
  • 9:00 pm GMT: RBNZ cash rate decision and statement (steady at 2.00% expected)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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