London Session Forex Recap – Nov. 22, 2016

  • Swiss trade balance: CHF 2.68B vs. CHF 3.88B expected, CHF 4.33B previous
  • U.K. public sector net borrowing: £4.3B vs. £5.9B expected, £9.2B previous
  • U.K. CBI industrial trends: -3 vs. -8 expected, -17 previous

Price action was pretty choppy during today’s morning London session, with many pairs trading sideways. However, the pound was clearly on the move. What’s up with that?

Major Events/Reports:

Brexit-related talks – Brexit Secretary David Davis and European Parliament Member Guy Verhofstadt met earlier today. After the meeting, Verhofstadt told reporters that there would be a “window of more or less 14 or 15 months” in order to negotiate an actual Brexit.

Verhofstadt is, in essence, saying that he wants negotiations to be done before the next 2019 European Parliament elections. Aside from that, Verhofstadt, who is going to be the E.U.’s Brexit negotiator, said that:

“It is impossible to find Brexit solutions where we destroy the four freedoms. These four freedoms are key, they are a basic element of the European Union: the freedom of movement of goods, services, capital and of people. We will certainly never accept whatever development where these four freedoms at put at risk.”

If y’all can still recall, one of things wanted by the U.K. before the Brexit referendum is border control, particularly with regard to immigration. An actual Brexit would therefore mean that the U.K. would have control over its borders again. And border control obviously goes against one of the E.U.’s four freedoms, namely the freedom of movement by people. Verhofstadt is therefore implying that he’s gonna be giving the U.K. a run for its money when the E.U. and the U.K. do finally start negotiating.

Verhofstadt’s tough talk likely renewed Brexit-related jitters, since pound pairs got kicked lower after he delivered his statements.

Commodities keep climbing – Yesterday’s broad-based commodities rally persisted during today’s morning London session.

Precious metals were in high demand, despite another bout of risk appetite.

  • Gold was up by 0.61% to $1,217.15 per troy ounce
  • Silver was up by 1.71% to $16.803 per troy ounce

Base metal were in high demand yet again.

  • Copper was up by 1.51% to $2.553 per pound
  • Nickel was up by 0.62% to $11,440.00 per dry metric ton

Oil benchmarks were also in positive territory.

  • U.S. crude oil was up by 0.58% to $48.52 per barrel
  • Brent crude oil was up by 0.70% to $49.24 per barrel

Market analysts attributed the broad-based commodities rally to early Greenback weakness and bargain buying, particularly of precious metals and base metals. Oil benchmarks, meanwhile, were in the green, thanks to optimism over OPEC’s planned oil production cut, market analyst say.

However, demand for oil during today’s session was not as strong compared to yesterday. This was probably because Iraqi Foreign Minister Ibrahim al-Jafari told everyone who would listen that “It would not be fair for us [Iraq] to cut oil output” because Iraq is still at war. This probably tempered optimism over the OPEC oil deal, as well as demand for oil.

Another round of risk-taking – The risk-on party continued in Europe, so the major European equity indices raked in gains again today.

  • The pan-European FTSEurofirst 300 was up by 0.44% to 1,348.41
  • The blue-chip Euro Stoxx 50 was up by 0.63% to 3,054.00
  • Germany’s DAX was up by 0.60% to 10,749.00
  • The U.K.’s FTSE 100 was up by 0.89% to 6,838.00

U.S. equity futures also got invited to the risk-on party.

  • S&P 500 futures were up by 0.25% to 2,198.50
  • Nasdaq futures were up by 0.40% to 4,873.38

Like yesterday, market analysts were pointing out that oil and mining shares were leading the way. We can therefore safely attribute the continued risk-on vibes to the continuing commodities rally.

Major Market Movers:

GBP – The pound had a very strong performance yesterday, but it took a tumble today. And as I mentioned earlier, Verhofstadt’s tough talk likely renewed Brexit-related jitters, since pound pairs noticeably began getting sellers when word got around. Well, that or pound bulls used Verhofstadt’s tough talk on Brexit as an opportunity for some profit-taking.

GBP/USD was down by 43 pips (-0.35%) to 1.2433, GBP/JPY was down by 45 pips (-0.33%) to 137.92, GBP/AUD was down by 67 pips (-0.40%) to 1.6819

EUR – Price action on the euro was rather choppy. Still, the euro clearly ended up as the second weakest currency of the session. The euro’s slide was probably due to Verhofstadt’s tough talk on Brexit. After all, the Euro Zone will also get affected by an actual Brexit.

EUR/USD was down by 9 pips (-0.08%) to 1.0610, EUR/CAD was down by 12 pips (-0.08%) to 1.4229, EUR/AUD was down by 18 pips (-0.13%) to 1.4355

Watch Out For:

  • 1:30 pm GMT: Canada’s headline (0.6% expected, -0.1% previous) and core (0.5% expected, 0.0% previous) retail sales readings
  • 1:30 pm GMT: Euro Zone consumer sentiment (-7.8 expected, -8.0 previous)
  • 3:00 pm GMT: U.S. existing home sales (5.44M expected, 5.47M previous)
  • 3:00 pm GMT: Richmond U.S. manufacturing index (1 expected, -4 previous)

See also:

Asian Session Recap

U.S. Session Recap

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