London Session Forex Recap – Nov. 1, 2016

  • Swiss retail sales y/y: -2.3% vs. -2.2% expected, -2.8% previous
  • Swiss manufacturing PMI: 54.7 vs. 53.9 expected, 53.2 previous
  • U.K. manufacturing PMI: 54.3 vs. 54.5 expected, 55.5 previous

Not much on the docket for today’s morning London session, so forex traders turned mainly to risk sentiment and commodities for direction.

Major Events/Reports:

U.K. manufacturing PMI tumbles – Markit released its October manufacturing PMI report for the U.K. earlier. And the headline reading dropped from 55.5 to 54.3, which is a harder fall compared to expected slide to 54.5. On the bright side, the reading is still above the 50.0 stagnation level. Moreover, the reading is also above the long-run average of 51.5.

Looking at the details of the report, the lower headline reading was due to the slowdown in output growth. But on a more upbeat note, surveyed companies “reported higher demand from both domestic and export clients.”

The PMI report also focused on the effects of the pound’s slide, stating that “Manufacturers reported that this aided efforts to increase inflows of new export business, resulting in new orders from the USA, the EU and China.” But on the flip-side, “Steep input price increases were registered across the consumer, intermediate and investment goods sectors, and at small, medium and large-scale producers alike” due to the weaker pound.

Risk aversion returns (to Europe) – Most of the major European equity indices opened higher and then proceeded to climb higher still. However, they later turned tail and retreated, ending the session mostly in the red and signaling the return of risk aversion (in Europe at least).

  • The pan-European FTSEurofirst 300 was down by 0.22 to 1,335.61
  • The blue-chip Euro Stoxx 50 was down by 0.30% to 3,052.00
  • Germany’s DAX was down by 0.23% to 10,642.00

The returning aversion to risk was blamed by some market analysts on negative reports, particularly for Standard Chartered and BP, which soured the overall mood in Europe.

Commodities climb higher– European equity indices may have been bleeding out during the morning London session, but most commodities were busy extending their gains.

Precious metals were leading the way, likely because of the risk-off vibes:

  • Gold was up by 1.20% to $1,288.35 per troy ounce
  • Silver was up by 2.48% to $18.237 per troy ounce

Oil benchmarks were in the green:

  • U.S. crude oil was up by 0.13% to $46.92 per barrel
  • Brent crude oil was up by 1.22% to $48.97 per barrel

And the same can be said for base metals:

  • Copper was down by 0.23% to $2.210 per pound
  • Nickel was down by 0.29% to $10,447.50 per dry metric ton

Market analysts can’t pinpoint the reason for the broad-based commodities rally. However, the Greenback’s recent slide probably helped, since a weaker Greenback means that commodities that are priced in U.S. dollars become relatively cheaper and more attractive to buy. The U.S. dollar index was down by 0.21% to 98.11 by the end of the morning London session.

Major Market Movers:

EUR & CHF – The lower-yielding euro and the safe-haven Swissy were the best-performing currency of the morning London session, likely because of the risk-off vibes. Between the two, the Swissy had a clear advantage.

USD/CHF was down by 66 pips (-0.68%) to 0.9825, EUR/CHF was down by 12 pips (-0.12%) to 1.0834, CAD/CHF was down by 37 pips (-0.51%) to 0.7340

EUR/USD was up by 62 pips (+0.57%) to 1.1026, EUR/JPY was up by 67 pips (+0.59%) to 115.60, EUR/GBP was up by 41 pips (+0.46%) to 0.9013

AUD – All the comdolls (AUD, NZD, CAD) got some love, likely because of the commodities rally. However, it was the Aussie that got the most love, since it ended up in third place after the Swissy and the euro.

AUD/USD was up by 21 pips (+0.28%) to 0.7677, AUD/JPY was up by 25 pips (+0.31%) to 80.49, AUD/CAD was up by 13 pips (+0.12%) to 1.0277

GBP – The pound started the session on a strong footing, but got pummeled by sellers when Markit’s manufacturing PMI disappointed.

GBP/USD was up by 13 pips (+0.11%) to 1.2233 with 1.2280 as session high, GBP/CHF was down by 70 pips (-0.58%) to 1.2019 with 1.2129 as session high, GBP/AUD was down by 27 pips (-0.17%) to 1.5931 with 1.6013 as session high

Watch Out For:

  • 12:30 pm GMT: Canada’s monthly GDP (0.2% expected, 0.5% previous)
  • 1:00 pm GMT: U.S. IBD consumer optimism (48.5 expected, 51.3 previous)
  • 1:30 pm GMT: Markit-RBC Canadian manufacturing PMI (50.3 previous)
  • 1:45 pm GMT: Markit’s final U.S. manufacturing PMI (no change from 53.2 expected)
  • 2:00 pm GMT: ISM’s U.S. manufacturing PMI (51.7 expected, 51.5 previous)
  • 4:00 pm GMT: BOC Governor Stephen Poloz has a speech
  • 9:45 pm GMT: New Zealand’s employment change (0.6% expected, 2.4% previous)
  • 9:45 pm GMT: New Zealand’s jobless rate (steady at 5.1% expected)
  • Dairy auction currently underway (+1.4% previous); auction usually ends at around 2:00 pm GMT

See also:

Asian Session Forex Recap

U.S. Session Recap

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