London Session Forex Recap – Nov. 14, 2016

  • Swiss PPI m/m: 0.1% vs. 0.3% previous
  • Swiss PPI y/y: -0.2% vs. -0.1% previous
  • Italian final HICP m/m: unchanged at 0.2% as expected
  • Italian final HICP y/y: unchanged at -0.1% as expected
  • Euro Zone industrial production m/m: -0.8% vs. -1.0% expected, 1.6% previous
  • Euro Zone industrial production y/y: 1.2% vs. 0.9% expected, 1.8% previous

Price action was relatively calm during Monday’s morning London session. However, both the Swissy and the pound were on the move, even though there were no apparent catalysts.

Major Events/Reports:

ECB’s Constancio speaks – ECB Vice President Vitor Constancio had a scheduled speech in Frankfurt earlier. And he warned that:

“We should be cautious in drawing hasty, positive conclusions from those market developments because they may not necessarily indicate that the world economy will have an accelerating recovery with higher growth.”

Constancio framed this warning on Trump’s “America First” policy, which he is thinks is bad overall. First, he said that Trump’s policies are protectionist, and “can substantially reduce the effect of higher growth into higher U.S. imports,” which will hurt world trade.

Next, he pointed out that emerging market economies have suffered “significant capital outflows and exchange rate depreciation” in the wake of Trump’s victory. This will likely continue and “can hinder further growth.”

And last but not the least, he expressed his concerns on the future of Europe, given that Trump’s victory has given rise to “a range of political risks [that] may induce economic shocks.”

Risk-taking to start the week, but… – Most of the major European equity indices are starting the week on a strong footing. And market analysts attributed this to strong demand for banking shares. Demand for banking shares, in turn, was attributed to expectations that a Trump presidency would mean the introduction of a large fiscal stimulus package.

However, signs of returning risk aversion began to pop up later, pushing equity indices off their highs. The catalyst for the returning risk aversion is not yet clear, though.

  • The pan-European FTSEurofirst 300 was up by 0.21% to 1,335.12 with 1,349.52 as session high,
  • The blue-chip Euro Stoxx 50 was up by 0.50% to 3,040.50 with 3,073.00 as session high,
  • Germany’s DAX was up by 0.44% to 10,714.60 with 10,800.50 as session high,
  • The U.K.’s FTSE 100 was up by 0.17% to 6,741.70 with 6,815.80 as session high

U.S. equity futures were in the green earlier. However, returning risk aversion has already pushed them into the red.

  • S&P 500 futures were down by 0.02% to 2,161.50
  • Nasdaq futures were down by 0.19% to 4,739.12

Oil extends losses – Oil benchmarks continued sliding lower during the morning London session.

  • U.S. crude oil was down by 1.36% to $42.82 per barrel
  • Brent crude oil was down by 1.01% to $44.30 per barrel

The extension of the decline in oil prices during the morning London session was due to continuing doubt over OPEC’s planned production cut, market analysts say.

Major Market Movers:

GBP – The pound was showing strength during the session, even though there were no apparent catalysts. However, most pound pairs got sold off earlier, so it’s possible that we’re just seeing shorts unwinding their positions.

GBP/USD was up by 33 pips (+0.27%) to 1.2529, GBP/JPY was up by 61 pips (+0.46%) to 135.13, GBP/CHF was up by 97 pips (+0.78%) to 1.2494

CHF – The safe-haven Swissy got swamped by sellers immediately when the morning London session rolled around. This may have been due to the prevalence of risk appetite at the time. However, the Swissy continued sinking lower, even when European equity indices began shedding their gains. Maybe the SNB was sneakily weakening the Swissy?

USD/CHF was up by 50 pips (+0.51%) to 0.9973, EUR/CHF was up by 35 pips (+0.33%) to 1.0735, AUD/CHF was up by 30 pips (+0.41%) to 0.7526

CAD – Despite falling oil prices, the Loonie managed to end up as the second-strongest currency of the session.

USD/CAD was down by 19 pips (-0.14%) to 1.3542, AUD/CAD was down by 23 pips (-0.22%) to 1.0220, NZD/CAD was down by 12 pips (-0.13%) to 0.9604

Watch Out For:

  • 3:00 pm GMT: ECB President Mario Draghi will speak
  • 10:00 pm GMT: Richmond Fed President Jeffrey M. Lacker has a speech
  • 11:30 pm GMT: San Francisco Fed President John Williams is scheduled to speak

See also:

Asian Session Forex Recap

Last Week’s Top Forex Movers

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

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