London Session Forex Recap – Oct. 5, 2016

  • Euro Zone final services PMI: revised to 50.9 vs. steady at 50.6 expected
  • U.K. services PMI: 52.6 vs. 52.1 expected, 52.9 previous
  • Euro Zone retail sales m/m: -0.1% as expected, 0.3% previous

Most commodities were in rally mode during the morning London session, so the Aussie and the Kiwi just shrugged off the risk-off vibes. The pound, meanwhile, gained some poise after tumbling earlier.

Major Events/Reports:

U.K. services PMI – The U.K.’s services PMI reading eased from 52.9 to 52.6 in September. But on a more upbeat note, the actual reading is a much softer fall compared to the expected slide to 52.1.

According to commentary from the PMI report, “new business rose at the fastest pace since February and the rate of job creation picked up.” However, “future expectations remained very low by historical standards,” which weighed down the headline reading.

BOE Broadbent speaks – BOE Deputy Governor Ben Broadbent had a speech earlier today. And while he admitted thatthe economy has performed better than surveys suggested immediately after the referendum,” he still stressed that Brexit-related risks are there, particularly with regard to longer-term investments.

However, Broadbent also didn’t want to commit to further easing by November just yet because of the pound’s recent slide. To be more specific, Broadbent had the following comments:

“Could the currency fall far enough, fast enough to warrant a reversal of the course and a removal of some monetary accommodation ? The answer is yes, in principle.”

“It would have to be judged in the context of what it meant for inflation, what it meant for growth. That is our remit.”

Risk aversion strikes back – There were signs of returning aversion in Europe, since almost all of the major European equity indices were bleeding out during today’s morning London session.

  • The pan-European FTSEurofirst 300 was down by 0.90% to 1,350.38
  • The blue-chip Euro Stoxx 50 was down by 0.69% to 3,013.50
  • The U.K.’s FTSE 100 was down 0.50% to 7,039.70
  • Germany’s DAX was down by 0.65% to 10,551.00

The downbeat mood was due to yesterday’s reports about the possibility that the ECB may be tapering its QE program, market analysts said.

Oil and precious metals recover – After getting routed yesterday, commodities returned with a vengeance, particularly oil and precious metals. Base metals, meanwhile, were more mixed.

Oil was leading the way:

  • U.S. WTI crude oil was up by 1.68% to $49.51 per barrel
  • Brent blend crude oil was up by 1.77% to $51.77 per barrel

Precious metals were following behind:

  • Gold was up by 0.51% to $1,276.15 per troy ounce
  • Silver was up by 0.69% to $17.898 per troy ounce

While not as broad-based as yesterday’s rout, commodities were mostly in the green today. The slight 0.07% dip in the U.S. dollar index to 96.03 for the day may have been a factor, since that would have commodities slightly more attractive.

However, specific drivers for each commodity were also likely in play. The risk-off mood, for example, was likely driving up demand for precious metals since they’re also considered as traditional safe-havens. Oil, meanwhile, was being bought up on speculation that U.S. oil inventories will drop later, according to market analysts.

Major Market Movers:

AUD & NZD – The higher-yielding Aussie and Kiwi were actually doing rather well despite the risk-off vibes. And Aussie and Kiwi bulls can probably thank the commodities rally for that. Strangely enough, the Loonie didn’t join its fellow comdolls, even though oil was really tearing it up.

AUD/USD was up by 18 pips (+0.24%) to 0.7620, AUD/JPY was up by 24 pips (+0.31%) to 78.53, AUD/CAD was up by 38 pips (+0.39%) to 1.0069

NZD/USD was up by 14 pips (+0.20%) to 0.7182, NZD/JPY was up by 20 pips (+0.26%) to 74.02, NZD/CAD was up by 32 pips (+0.34%) to 0.9490

GBP – The pound recovered from some of its earlier losses to end up as the third best-performing currency after the Aussie and the Kiwi. The likely catalysts for the pound’s recovery were either the better-than-expected services PMI reading or BOE Broadbent’s comment about holding off on further easing due to the pound’s recent weakness (or maybe both). However, other market analysts were saying that we’re just seeing some profit-taking after some pound pairs fell to multi-year lows.

GBP/USD was up by 29 pips (+0.23%) to 1.2721, GBP/JPY was up by 38 pips (+0.29%) to 131.10, GBP/CAD was up by 60 pips (+0.36%) to 1.6806

Watch Out For:

  • 12:15 pm GMT: ADP U.S. non-farm employment change (165K expected, 177K previous)
  • 12:30 pm GMT: U.S. trade balance (-$39.20B expected, -$39.47B previous)
  • 12:30 pm GMT: Canadian trade balance (-$2.45B expected, -$2.49B previous)
  • 1:45 pm GMT: Markit’s final U.S. services PMI (no revision from 51.9 expected)
  • 2:00 pm GMT: ISM’s U.S. non-manufacturing PMI (53.0 expected, 51.4 previous)
  • 2:00 pm GMT: U.S. factory orders (-0.2% expected, 1.9% previous)
  • 2:30 pm GMT: U.S. crude oil inventories (1.1M expected, -1.9M previous)

See also:

Asian Session Forex Recap

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis.

Head on to Big Pippin’s Daily Chart Art for some pip-locking technical weeks!