London Session Forex Recap – Sept. 28, 2016

  • German GFK consumer sentiment: 10.0 vs. 10.2 expected, 7.2 previous
  • Swiss UBs consumption indicator: 1.53 vs. 1.45 previous
  • French INSEE consumer confidence: steady at 97 as expected
  • Fed speakers for later, including Fed Head Yellen
  • ECB Head Honcho Draghi also scheduled to speak

Price action during today’s morning London session was rather wonky since the euro reigned supreme while the Kiwi floundered, even though risk appetite returned.

Major Events/Reports:

BOE Shafik speaks – BOE Deputy Governor Minouche Shafik delivered a speech earlier. And she was pretty positive on the U.K. economy, saying that “Thus far, the welcome improvement in the forward looking indicators suggests that the slowdown may not be as sharp or as sudden as we might have feared.”

However, she also said that “It seems likely to me that further monetary stimulus will be required at some point in order to help ensure that a slowdown in economic activity doesn’t turn into something more pernicious.”

In simpler terms, she favors further easing as a preemptive measure. She did say that the path of the BOE’s monetary policy is data-dependent, though, when she said that “The likely timing of that stimulus will depend on the continued evolution of the data over the coming weeks and months.” A rate cut is therefore not a foregone conclusion.

Risk appetite returns – After a very risk averse Monday and rather skittish Tuesday, risk appetite finally returned to Europe in force.

  • The pan-European FTSEurofirst 300 was up by 1.01% to 1,352.67
  • The blue-chip Euro Stoxx 50 was up by 1.18% to 3,002.00
  • The U.K.’s FTSE 100 was up 0.90% to 6,869.00
  • The DAX was up by 1.12% to 10,476.00

Market analysts attributed the return of risk appetite to the recovery in Deutsche Bank shares after a U.S. DOJ official said that the whopping $14 billion mortgage-related fine imposed on Deutsche Bank may be lowered.

It also probably helped that relatively more credible media outlets like the BBC were churning out reports based on rumors that the German government would be stepping in to rescue Deutsche Bank.

Oil climbs higher – Oil benchmarks extended their gains during the morning London session. Market analysts are still pointing to optimism for today’s OPEC meeting, as well as the surprise draw in U.S. oil inventories, which triggered speculation that the government data would also print a surprise draw later.

  • U.S. WTI crude oil was up by 1.16% to $45.19 per barrel
  • Brent blend crude oil was up by 1.44% to $47.19 per barrel

Major Market Movers:

EUR – The euro ended up as the one currency to rule them all during the morning London session, even though European equities were on the green. A probable reason for this wonky price action is that the recovery in Deutsche Bank shares also improved confidence in the Euro Zone’s banking system.

EUR/USD was up by 19 pips (+0.17%) to 1.1218, EUR/NZD was up by 73 pips (+0.48%) to 1.5458, EUR/AUD was up by 54 pips (+0.38%) to 1.4631

CHF – I guess the SNB is not in the mood to intervene in the forex market today. And I’m saying that because the safe-haven Swissy was the second-strongest currency of the session. Again, risk appetite was the dominant risk sentiment, so we’ve got yet another wonky price action.

USD/CHF was down by 15 pips (-0.15%) to 0.9709, CAD/CHF was down by 17 pips (-0.23%) to 0.7344, AUD/CHF was down by 27 pips (-0.36%) to 0.7443

NZD – Despite the return of risk appetite, the higher-yielding Kiwi extended its losses from the earlier Asian session, and without any catalysts whatsoever. The Aussie was doing the same to a lesser extent. Wonky price action indeed.

NZD/USD was down by 21 pips (-0.28%) to 0.7256, NZD/CHF was down by 30 pips (-0.43%) to 0.7045, NZD/JPY was down by 18 pips (-0.25%) to 72.98

Watch Out For:

  • 12:30 pm GMT: Headline (-1.5% expected, 4.4% previous) and core (-0.5% expected, 1.3% previous) reading for U.S. durable goods orders
  • 2:00 pm GMT: Fed Chair Janet Yellen will testify before the Committee on Financial Services
  • 2:10 pm GMT: St. Louis Fed President James Bullard has a speech
  • 2:30 pm GMT: ECB President Mario Draghi is scheduled to speak
  • 2:30 pm GMT: U.S. crude oil inventories (2.4M expected, -6.2m previous)
  • 11:15 pm GMT: Kansas City Fed President Esther L. George will speak

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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