London Session Forex Recap – Oct. 14, 2016

  • Swiss PPI m/m: 0.3% vs. 0.1% expected, -0.3% previous
  • Swiss PPI y/y: -0.1% vs. -0.2% expected, -0.4% previous
  • U.K. construction output m/m: -1.5% vs.
  • U.K. construction output y/y: 0.2% vs. 1.2% expected, -1.5% previous
  • Euro Zone trade balance: €23.3B vs. €20.4B expected, €20.8B previous
  • U.S. retail sales coming up
  • Fed Head Yellen will speak later

It was mainly about risk-taking during Friday’s London session, so the higher-yielding Aussie got lots of love while the safe-haven yen got scorned. The pound, meanwhile, got a lift from BOE Carney’s rhetoric.

Major Events/Reports:

BOE Carney speaks – BOE Guv’nah Mark Carney was under the spotlight earlier, and he said some rather optimistic things. He , for example, said that the pound’s recent fall “helps the economy adjust.” However, Carney also warned that it’s “going to get difficult [for those on the lowest incomes] as we move from no inflation to some inflation.”

However, the one statement that likely caught the attention of most traders is Carney’s statement that “Our [the BOE] job is not to target the exchange rate, our job is to target inflation,” adding later that “But that doesn’t mean we’re indifferent to the level of sterling. It does matter, ultimately, (for) inflation and over the course of two to three years out, so it matters to the conduct of monetary policy.”

Risk appetite makes a comeback – Risk appetite returned with a vengeance in Europe, sending most of the major European equity indices higher.

  • The pan-European FTSEurofirst 300 was up by 1.55% to 1,344.52
  • The blue-chip Euro Stoxx 50 was up by 2.01% to 3,033.00
  • Germany’s DAX was up by 1.67% to 10,587.70
  • The U.K.’s FTSE 100 was up 0.90% to 7,039.50

The risk-on mood also buoyed U.S. equity futures.

  • S&P 500 futures were up by 0.45% to 2,135.75
  • Nasdaq futures were up by 0.43% to 4,816.62

The upbeat mood was due to China’s positive inflation numbers from the earlier session, according to market analysts.

Oil continues to rise – Oil benchmarks extended their rally during the morning London session. And market analysts are still pointing to the drop in U.S. oil production, as reported by the U.S. Energy Information Agency (IEA) earlier.

  • U.S. crude oil was up by 1.11% to $51.00 per barrel
  • Brent blend crude oil was up by 0.73% to $52.41 per barrel

Major Market Movers:

AUD – The higher-yielding Aussie was in high-demand during the session, likely because of the risk-on vibes.

AUD/USD was up by 42 pips (+0.55%) to 0.7629, AUD/JPY was up by 67 pips (+0.85%) to 79.55, AUD/CHF was up by 53 pips (+0.72%) to 0.7548

CAD – The Loonie rode the oil rally higher to end up as the second-strongest currency of the session (as well as the day so far).

USD/CAD was down by 35 pips (-0.27%) to 1.3167, EUR/CAD was down by 57 pips (-0.39%) to 1.4491, NZD/CAD was down by 25 pips (-0.27%) to 0.9349

GBP – The pound managed to win against most of its forex rivals to finish as the third-strongest currency of the session. The pound noticeably started gaining strength when Carney mentioned that the BOE is keeping an eye on the pound, which I already talked about earlier.

GBP/USD was up by 47 pips (+0.39%) to 1.2250, GBP/CHF was up by 66 pips (+0.55%) to 1.2121, GBP/JPY was up by 85 pips (+0.68%) to 127.73

JPY – The risk-friendly environment was not a friend to the safe-haven currencies, but it was openly hostile to the yen, since the yen ended up as the weakest currency of them all.

USD/JPY was up by 30 pips (+0.29%) to 104.26, CHF/JPY was up by 14 pips (+0.13%) to 105.38, CAD/JPY was up by 43 pips (+0.56%) to 79.18

Watch Out For:

  • 12:30 pm GMT: Headline (0.6% expected, -0.3% previous) and core (0.5% expected, -0.1% previous) U.S. retail sales readings
  • 12:30 pm GMT: Headline (0.2% expected, 0.0% previous) and core (0.1% expected, 0.1% previous) U.S. PPI readings
  • 12:30 pm GMT: Boston Fed President Eric Rosengren has a speech
  • 1:30 pm GMT: BOE Guv’nah Mark Carney will speak again
  • 2:00 pm GMT: University of Michigan preliminary U.S. consumer sentiment (92.1 expected, 91.2 previous)
  • 5:30 pm GMT: U.S. Fed Chair Janet Yellen has a speech
  • 6:00 pm GMT: U.S. Federal budget balance ($30.0B expected, -$107.1B previous)

See also:

Asian Session Forex Recap

U.S. Session Recap

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