London Session Forex Recap – Oct. 21, 2016

  • U.K. Public Borrowing (PSNB ex banks): £10.12B vs £8.5B forecast, £10.8B

Another round of mixed price action in the currency markets thanks to a surprise in U.K. government borrowing, Fed speculation, and oil’s bounce back in the morning London session.

Major Events/Reports:

U.K. Government Spending Increases – The gap between U.K. government revenue and public spending increased last month, forcing the government to borrow £10.12B in September vs. £8.5B forecast. Government receipts were pulled down by a fall in corporation tax and lower stamp duty receipts, which could become the new trend as inflation rises and a potential economic slowdown due to the Brexit situation.  There wasn’t a big initial reaction to the data from Sterling initially, but the momentum is picking up to the downside on the session.

Oil is back in rally mode –Crude oil rises after Thursday’s big profit taking session, likely on Russia’s output freeze commitment with other oil producers to help prop up market prices. The fundamental story seems to have improved for oil as fresh data from the EIA this week shows a decrease in inventories. This has help not only oil futures tick higher, but the Canadian dollars seems to be getting a lift as well.

  • U.S. crude oil was up by 0.57% to $50.92 per barrel
  • Brent blend crude oil was up by 0.78% to $51.78 per barrel

Mixed risk sentiment and price action – European equity markets were mostly higher across the board:

  • The pan-European FTSEurofirst 300 was up by 0.06% to 1,359.42
  • The blue-chip Euro Stoxx 50 was down by 0.05% to 3,075.11
  • Germany’s DAX was up by 0.08% to 10,710.32
  • The U.K.’s FTSE 100 was down 0.30% to 7,047.68

U.S. equity futures have taken a dip, likely on growing speculation the Fed may raise rates this year:

  • S&P 500 futures were down by 0.29% to 2,130.75
  • Nasdaq futures were down by 0.07% to 4,840.25

Major Market Movers:

GBP – Broad weakness continues for Sterling after government borrowing increases:

GBP/USD was down 55 pips (-0.47%) to 1.2189, GBP/JPY was 93 pips (-0.74%) at 126.42, GBP/CAD was down 75 pips (-0.44%) to 1.6134

CAD – Riding oil’s strength to take back some Asia session losses:

USD/CAD was just above flat on the session trading at 1.3230, EUR/CAD was down 56 pips (-0.39%) to 1.4398, AUD/CAD is back in the green trading at 1.0097, down from Asia session high around 1.0130

EUR – bounces back a bit from Asia session pummeling, but still down on the session:

EUR/JPY was down 68 pips (-0.60%) to 112.91, EUR/USD was down 43 pips (-0.40%) to 1.0885, EUR/CHF was down 22 pips (-0.21%) to 1.0824)

Watch Out For:

  • 12:30 pm GMT: Canadian Core CPI m/m (0.3% forecast, -0.1% previous)
  • 12:30 pm GMT: Canadian CPI m/m (0.2% forecast, -0.2% previous)
  • 12:30 pm GMT: Canadian Retail Sales m/m (0.3% forecast, -0.1% previous)
  • 2:00 pm GMT: European Consumer Sentiment (-8 expected, -8.2 previous)

See also:

Asian Session Forex Recap

U.S. Session Recap

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