London Session Forex Recap – Sept. 22, 2016

  • French INSEE manufacturing confidence: 103 vs. unchanged at 101 expected
  • U.K. CB industrial trends: unchanged at -5 as expected

Risk-taking was the name of the game, as equities and commodities rallied hard during the morning London session. However, it was the safe-haven Swissy that ended up being the one currency to rule them all, which is admittedly very weird.

Major Events/Reports:

FPC statement – The BOE Financial Policy Committee’s (FPC) statement was released earlier today. And everything in the FPC statement can be summed up as this: the threat from Brexit still exists.

Regarding some of the more important specifics, the FPC “judges that the current outlook for financial stability in the United Kingdom remains challenging.” For one, “the risks of a sharp adjustment are crystallising” in the commercial real estate market, given that “Prices have fallen and transactions are at their lowest level since 2009.”

Another is that household debt remains very high. And the forecasted weakening in employment and income growth would weigh heavily on these households, which may force them to cut back “sharply on expenditure to service debts.” And that, in turn, “could affect broader economic activity.”

And while the pound’s drop “will help to smooth the adjustment of the current account over time, the risk remains of a fall in overseas investors’ appetite to invest in the United Kingdom.”

Given all that, it’s no wonder the BOE retained its easing bias during the September BOE statement.

Risk-taking frenzy – Market players had a “let’s buy everything” mentality during the morning London session.

  • The pan-European FTSEurofirst 300 was up by 1.42% to 1,366.35
  • The blue-chip Euro Stoxx 50 was up by 2.01% to 3,046.00
  • The U.K.’s FTSE 100 was up by 1.26% to 6,920.90
  • The DAX was up by 1.94% to 10,638.50

U.S. equity futures were moderately up, so the risk-friendly mood may carry over into the upcoming U.S. session.

  • S&P 500 futures were up by 0.35% to 2,163.75
  • Nasdaq futures were up by 0.34% to 4,866.25

Quite naturally, market analysts were quick to attribute the risk-taking to yesterday’s FOMC statement when the Fed sat on its hands (yet again) while downgrading its economic projections for the year. The Fed also signaled that there would only be one rate hike this year at the most, and that there would be fewer rate hikes in the future.

You can find out more about the details of the FOMC statement by checking out Forex Gump’s 5 Highlights of the September FOMC Statement.

Commodities surge – Commodities were broadly glowing gamma green during the morning London session.

Base metals were really in demand:

  • Copper was up by 1.48% to $2.187 per pound
  • Aluminum was up by 2.34% to $1,620.75 per kilogram
  • Nickel was up by 2.54% to $10,590.00 per dry metric ton

Precious metals got a nice boost despite the risk-on vibes:

  • Gold was up by 0.45% to $1,337.45 per troy ounce
  • Silver was up by 0.86% to $19.938 per troy ounce

Oil benchmarks were floating well enough:

  • U.S. WTI crude oil was up by 1.04% to $45.81 per barrel
  • Brent blend crude oil was up by 0.79% to $47.20 per barrel

The broad-based commodities party was very likely due to the Greenback’s weakness in the aftermath of yesterday’s FOMC statement.

Major Market Movers:

CHF – The prevalence of risk appetite didn’t seem to matter to the safe-haven Swissy, since it just plowed through its forex rivals. Demand for the Swissy was so strong that it ended up getting crowned as the morning London session’s king of pips (or queen, if you like). Unfortunately, this wonky price action didn’t appear to have any direct catalyst. It’s possible, however, that the Swissy was getting buoyed by all the uncertainty generated by the Fed and the BOJ.

USD/CHF was down by 35 pips (-0.37%) to 0.9674, NZD/CHF was down by 39 pips (-0.55%) to 0.7088, EUR/CHF was down by 31 pips (-0.28%) to 1.0869

JPY – The Swissy’s price action may been weird, but the yen’s price action was perfectly reasonable in that it got slapped lower across the board. And we can probably thank the risk-friendly environment for that.

USD/JPY was up by 32 pips (+0.32%) to 100.75, CHF/JPY was up by 70 pips (+0.68%) to 104.14, AUD/JPY was up by 32 pips (+0.42%) to 77.21

CAD – The broad-based commodities rally have the comdolls a boost. But it looks like the Loonie was the most preferred comdoll since it ended up in second place after the mighty Swissy.

USD/CAD was down by 31 pips (-0.24%) to 1.3012, AUD/CAD was down by 14 pips (-0.14%) to 0.9973, NZD/CAD was down by 40 pips (-0.43%) to 0.9534

Watch Out For:

  • 12:30 pm GMT: U.S. initial jobless claims (261K expected, 260K previous)
  • 1:00 pm GMT: U.S. FHFA HPI (0.3% expected, 0.2% previous)
  • 1:00 pm GMT: ECB President Super Mario Draghi has a speech
  • 1:30 pm GMT: BOE Deputy Governor Jon Cunliffe will be speaking in a panel discussion
  • 2:00 pm GMT: Euro Zone consumer sentiment (-8.2 expected, -8.5 previous)
  • 2:00 pm GMT: U.S. existing home sales (5.45M expected, 5.39M previous)
  • 2:00 pm GMT: U.S. CB leading indicator (0.0% expected, 0.4% previous)
  • 5:00 pm GMT: BOE Guv’nah Mark Carney will give a lecture

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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