London Session Forex Recap – Sept. 30, 2016

  • U.K. Nationwide HPI m/m: 0.3% vs. 0.6% expected, 0.6% previous
  • German retail sales m/m: -0.4% vs. -0.2% expected, 0.5% previous
  • Swiss KOF leading indicator: 101.3 vs. 100.5 expected, 99.7 previous
  • U.K. final Q2 GDP q/q: 0.7% vs. unchanged at 0.6% expected
  • U.K. final Q2 GDP y/y: 2.1% vs. unchanged at 2.2% expected
  • U.K. current account: -£28.7B vs. -£30.6B expected, -£27.0B previous
  • Euro Zone jobless rate: steady at 10.1% vs. downtick to 10.0% expected
  • Euro Zone flash HICP y/y: 0.4% vs. 0.3% expected, 0.2% previous
  • Euro Zone flash core HICP y/y: 0.8% vs. 0.9% expected, 0.8% previous

The Swissy and the euro were in retreat while the higher-yielding comdolls were climbing higher during the session, which is weird because of the risk-off mood. Maybe we’re seeing the usual weirdness that comes with month-end flows?

Major Events/Reports:

Month-end flows? – It’s the last trading day of the month, so some month-end capital flows are to expected as hedge funds, mutual funds, pension funds, and other large players rebalance their portfolios and/or prepare to make cash distributions. Also, month-end flows help to explain the rather wonky price action during the session.

Euro Zone inflation – The flash headline reading for the Euro Zone’s harmonised indices of consumer prices (HICP) increased by 0.4% year-on-year during September. This is better than the expected +0.3%, as well as the previous month’s +0.2%. The core reading, meanwhile, maintained the previous month’s +0.8% pace, missing expectations of a faster 0.9% increase. The faster increase for the headline reading was apparently due to the higher cost of services (1.2% vs. 1.1% previous) and energy being less of a drag (-3.0% vs. -5.6% previous).

Gloomy day in Europe – Intense risk aversion engulfed the European equities market during the morning London session, sending most of the major equity indices lower.

  • The pan-European FTSEurofirst 300 was down by 1.15% to 1,334.46
  • The blue-chip Euro Stoxx 50 was down by 1.46% to 2,947.50
  • The U.K.’s FTSE 100 was down 0.90% to 6,857.00
  • The DAX was down by 1.19% to 10,285.40

U.S. equity futures were also down, signaling that the risk-off vibes may carry over to the upcoming U.S. session.

  • S&P 500 futures were down by 0.06% to 2,147.25
  • Nasdaq futures were down by 0.03% to 4,842.62

Market analysts were blaming the feelings of doom and gloom to renewed jitters over Deutsche’s financial situation after reports began to spread that hedge funds were reducing their exposure to Deutsche bank. The selloff in Deutsche Bank shared, in turn, weighed heavily on the entire European banking sector, souring overall sentiment in the process.

Commodities rally, but oil retreats – Commodities had a mixed performance during the morning London session but were mostly in positive territory.

The risk-off vibes probably drove up demand for precious metals:

  • Gold was up by 0.20% to $1,328.40 per troy ounce
  • Silver was up by 1.06% to $19,392 per troy ounce

Base metals were broadly in the green, although there was no apparent catalyst:

  • Copper was up by 0.33% to $2.197 per pound
  • Aluminum was up by 0.87% to $2,377.00 per kilogram
  • Nickel was up by 1.01% to $110,522.50 per dry metric ton

One commodity that was noticeabley NOT in the green was oil, as skepticism on OPEC’s plans to cut production persisted:

  • U.S. WTI crude oil was down by 0.33% to $47.67 per barrel
  • Brent blend crude oil was down by 0.52% to $49.55 per barrel

Major Market Movers:

CHF – The Swissy got its butt kicked really hard during the morning London session, even though risk aversion was the dominant sentiment in other markets. A possible explanation for this wonky price action is the weirdness that usually comes with month-end flows. However, some market analysts are also pointing to speculation that the SNB was intervening to weaken the Swissy.

USD/CHF was up by 88 pips (+0.90%) to 0.9744, EUR/CHF was up by 51 pips (+0.47%) to 1,0878, GBP/CHF was up by 117 pips (+0.94%) to 1.2629

EUR – Despite the slump in European equities, the euro was also slumping against most of its peers, other than the Swissy. Again, month-end flows may be the culprit, but I also agree with the assertion of some market analysts that renewed jitters over Deutsche bank may have helped dampen demand for the euro, given that Deutsche Bank’s problems could potentially become a problem for the entire Euro Zone.

EUR/USD was down by 50 pips (-0.45%) to 1.1160, EUR/NZD was down by 92 pips (-0.60%) to 1.5352, EUR/AUD was down by 78 pips (-0.53%) to 1.4649

NZD & AUD – The Kiwi and the Aussie just shrugged off the risk-off vibes to end up as the main winners of the morning London session. Month-end flows could be a reason, but the commodities rally also likely helped stoke demand for the two comdolls.

NZD/USD was up by 11 pips (+0.16%) to 0.7268, NZD/JPY was up by 42 pips (+0.58%) to 73.62, NZD/CHF was up by 76 pips (+1.08%) to 0.7084

AUD/USD was up by 9 pips (+0.11%) to 0.7618, AUD/JPY was up by 39 pips (+0.52%) to 77.15, AUD/CHF was up by 74 pips (+1.02%) to 0.7424

Watch Out For:

  • 12:30 pm GMT: Canada’s monthly GDP (0.3% expected, 0.6% previous)
  • 12:30 pm GMT: Canadian RMPI (-1.0% expected, -2.7% previous)
  • 12:30 pm GMT: U.S. core PCE price index (0.2% expected, 0.1% previous)
  • 12:30 pm GMT: U.S. personal income (0.2% expected, 0.4% previous)
  • 12:30 pm GMT: U.S. personal spending (0.1% expected, 0.3% previous)
  • 1:45 pm GMT: Chicago PMI (52.0 expected, 51.5 previous)
  • 2:00 pm GMT: Revised University of Michigan consumer sentiment (90.0m expected, 89.8 previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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