London Session Forex Recap – Sept. 26, 2016

  • German IFO expectations: 104.5 vs. steady at 100.1 expected
  • German IFO business climate: 109.5 vs. 106.3 expected, 106.2 previous
  • German IFO current conditions: 114.7 vs. 112.9 expected, 112.8 previous
  • Italian retail sales m/m: -0.3% vs. 0.0% expected, 0.3% previous
  • U.K. BBA mortgage approvals: 37.00K vs. 37.10K expected, 37.66K previous

Risk aversion from the earlier session persisted into Monday’s morning London session, so the safe-haven yen got a lot of love from forex traders.

Major Events/Reports:

U.K. BBA mortgage approvals down – The number of mortgages for home purchases that were approved by members of British Bankers’ Association was only 37K in August. This reading is the lowest in 20 months.

Commentary from Dr. Rebecca Harding, Chief Economist at the BBA, was also pretty downbeat. Specifically, Dr. Harding said that “The High Street Banking statistics published today point to a softer housing market, strong consumer credit and slightly weaker business borrowing in August.”

However, Dr. Harding also said that “The data was collected before the Bank of England reduced interest rates to 0.25% and so give an indication of some of the underlying pressures that the MPC was responding to when it made this decision.”

Oil climbs higher – Oil benchmarks steadily extended their gains during the morning London session.

  • U.S. WTI crude oil was up by 1.30% to $45.06 per barrel.
  • Brent blend crude oil was up by 1.46% to $47.16 per barrel.

Oil’s continuing rise was due to optimism that an oil deal could be reached as OPEC members meet, market analysts said.

Risk aversion to start the week – The risk aversion from the earlier session spilled over into the European session. Most European equity indices opened in the red and continued to bleed out as the session progressed.

  • The pan-European FTSEurofirst 300 was down by 1.42% to 1,340.56
  • The blue-chip Euro Stoxx 50 was down by 1.60% to 2,985.00
  • The U.K.’s FTSE 100 was down 1.12% to 6,831.70
  • The DAX was down by 1.63% to 10,454.00

The aversion to risk may carry over into the upcoming U.S. session since U.S. equity futures were also lower.

  • S&P 500 futures were down by 0.42% to 2,149.00
  • Nasdaq futures were down by 0.54% to 4,830.50

The gloomy risk sentiment during the session was blamed by market analysts largely on news over the weekend that Merkel’s government will not provide state assistance to the embattled Deutsche Bank.

Oh, for those who don’t know, the U.S. Department of Justice has recently demanded Deutsche Bank to pay $14 billion in order to settle claims that the bank improperly sold mortgage-backed securities.

Major Market Movers:

JPY – Risk aversion persisted into the morning London session, so the safe-haven yen was naturally in high demand.

USD/JPY was down by 42 pips (-0.42%) to 100.41, AUD/JPY was down by 18 pips (-0.23%) to 76.63, CHF/JPY was down by 17 pips (-0.16%) to 103.71

CAD – Despite the rally in oil prices, the Loonie still lost out against its peers. There weren’t any direct catalysts for the Loonie’s weakness during the session. However, it’s possible that last Friday’s disappointing economic data are still weighing down on the Loonie. All the more so, since BOC Governor Stephen Poloz has a speech later.

EUR/CAD was up by 48 pips (+0.32%) to 1.4830, AUD/CAD was up by 20 pips (+0.20%) to 1.0051, NZD/CAD was up by 23 pips (+0.24%) to 0.9563

USD – The risk-off mood didn’t support the Greenback any. Heck, the Greenback even ended up as one of the weakest currencies of the session. There were no catalysts that could account for this. It’s possible, however, that disappointing over the last week’s Fed decision is continuing to weigh down on the Greenback.

EUR/USD was up by 37 pips (+0.33%) to 1.1261, AUD/USD was up by 15 pips (+0.20%) to 0.7632, NZD/USD was up by 16 pips (+0.23%) to 0.7262

GBP – The Loonie and the Greenback were pretty weak. However, the pound was the weakest currency of them all. The only catalyst during the session was the disappointing reading for BBA mortgage approvals. However, that economic report is only mid-tier at best. Also, the pound began to show weakness before the report was released. It’s therefore more probable that the post-MPC statement theme of the past couple of weeks is just continuing to play out.

GBP/USD was down by 14 pips (-0.11%) to 1.2931, GBP/JPY was down by 67 pips (-0.52%) to 129.86, GBP/CHF was down by 46 pips (-0.37%) to 1.2520

Watch Out For:

  • 2:00 pm GMT: U.S. new home sales (598K expected, 654K previous)
  • 3:05 pm GMT: ECB President Mario Draghi will testify
  • 3:45 pm GMT: U.S. Fed Governor Daniel Tarullo has a speech
  • 11:10 pm GMT: BOC Governor Stephen Poloz will give a speech

See also:

Asian Session Forex Recap

Last Week’s Top Forex Movers

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