London Session Forex Recap – Nov. 23, 2016

  • French manufacturing PMI: 51.5 as expected vs. 51.8 previous
  • French services PMI: 52.6 vs. 51.9 expected, 51.4 previous
  • German manufacturing PMI: 54.4 vs. 54.8 expected, 55.0 previous
  • German services PMI: 55.0 vs. 54.0 expected, 54.2 previous
  • Euro Zone manufacturing PMI: 53.7 vs. 53.3 expected, 53.5 previous
  • Euro Zone services PMI: 54.1 vs. 52.9 expected, 52.8 previous
  • FOMC meeting minutes coming out later

The risk-off vibes dictated forex price action for the most part. However, the pound got a late bullish boost, thanks probably to profit-taking in the wake of the Autumn Forecast Statement.

Major Events/Reports:

Autumn Forecast Statement – U.K. Chancellor of the Exchequer Philip Hammond stood before Parliament earlier, and delivered the Office of Budget Responsibility’s (OBR) forecasts, which are as follows:

  • 2016 GDP: revised higher to 2.1% vs. 2.0% originally
  • 2017 GDP: revised lower to 1.4% vs. 2.2% originally
  • 2018 GDP: revised lower to 1.7% vs. 2.1% originally
  • 2019 GDP: 2.1%, no change
  • 2020 GDP: 2.1%, no change
  • 2021 GDP: 2.0% (new forecast)

According to Hammond, the downgraded forecasts for 2017 and 2018 were due to “lower investment and weaker consumer demand, driven respectively by greater uncertainty and by higher inflation resulting from slower depreciation.”

Hammond did try to be optimistic, though, saying that growth is “slower of course than we would wish, but still equivalent to the IMF’s forecast for Germany and higher than the forecast for growth for many of our European neighbors, including France and Italy.”

Forecasts for 2019 and 2020 were unchanged because the economy was expected to recover “as effects of uncertainty diminish,” Hammond explained. He did quip later that “the referendum decision means that potential growth over the forecast period is 2.4 percentage points lower than would otherwise have been the case.” But he quickly added that the labor market is forecasted “to remain robust,” with jobs growth expected every year until the end of the forecast period (2021).

Commodities fall – Commodities were broadly in the green during the earlier Asian session. The broad-based rally finally came to an end during today’s morning London session, though.

The risk-off vibes didn’t seem to trigger safe-haven demand for precious metals.

  • Gold was down by 0.28% to $1,207.85 per troy ounce
  • Silver was down by 0.55% to $16.543 per troy ounce

Base metal were also mostly kicked lower.

  • Copper was down by 0.69% to $2.528 per pound
  • Nickel was down by 0.13% to $11,335.00 per dry metric ton

Oil benchmarks, meanwhile, were leaking red.

  • U.S. crude oil was down by 0.29% to $47.89 per barrel
  • Brent crude oil was down by 0.12% to $49.06 per barrel

Market analysts haven’t pinpointed the reason for the broad-based slide yet. However, it’s highly probable that the Greenback’s recovery triggered some profit-taking, given that the U.S. dollar index was now up by 0.17% to 101.26 for the day. The U.S. dollar index was down as low as 100.96 earlier.

Risk aversion returns – Most of the major European equities tried to stage another rally earlier today. However, they ended up visiting negative territory instead.

  • The pan-European FTSEurofirst 300 was down by 0.44% to 1,338.21
  • The blue-chip Euro Stoxx 50 was down by 0.52% to 3,028.00
  • Germany’s DAX was down by 0.55% to 10,655.00

U.S. equity futures were also feeling the heat.

  • S&P 500 futures were down by 0.05% to 2,199.25
  • Nasdaq futures were down by 0.07% to 4,871.12

Market analysts pointed out that mining shares were leading the way higher earlier, thanks to the commodities rally. Unfortunately, commodities reversed course, pulling mining shares down with them.

Major Market Movers:

GBP – The pound started the session by dipping lower. There weren’t any apparent catalysts, but it’s possible that market players were speculating that U.K. Chancellor of the Exchequer Philip Hammond would be delivering some bad news. However, the pound later began to get a strong bullish boost when Hammond began saying his piece before Parliament. Hammond’s forecasts were rather downbeat, though, so the bullish boost was probably due to profit-taking.

GBP/USD was up by 19 pips (+0.16%) to 1.2428, GBP/NZD was up by 44 pips (+0.31%) to 1.7626, GBP/AUD was up by 69 pips (+0.41%) to 1.6751

AUD – The Aussie was the weakest currency of the morning London session. And the risk-off vibes and commodities retreat were the likely reasons for higher-yielding Aussie’s misfortune.

AUD/USD was down by 18 pips (-0.24%) to 0.7419, AUD/CAD was down by 17 pips (-0.17%) to 0.9976, AUD/CHF was down by 18 pips (-0.24%) to 0.7504

CHF – The prevalence of risk aversion may have been toxic for the Aussie, but it likely sent safe-haven flows towards the Swissy. After all, the Swissy did end up as the second best-performing currency of the session.

USD/CHF was down by 3 pips (-0.03%) to 1.0113, EUR/CHF was down by 12 pips (-0.12%) to 1.0734, NZD/CHF was down by 11 pips (-0.15%) to 0.7131

Watch Out For:

  • 1:30 pm GMT: U.S. initial jobless claims (250k expected, 235K previous)
  • 1:30 pm GMT: Headline (1.7% expected, -0.3% previous) and core (0.2% expected, 0.1% previous) readings for U.S. durable goods orders
  • 2:00 pm GMT: U.S. FHFA HPI (0.6% expected, 0.7% previous)
  • 2:45 pm GMT: Markit’s flash U.S. manufacturing PMI (53.5 expected, 53.4 previous)
  • 3:00 pm GMT: U.S. new home sales (0.59M expected, same as previous)
  • 3:30 pm GMT: U.S crude oil inventories (0.3M expected, 5.3M previous)
  • 7:00 pm GMT: FOMC meeting minutes

See also:

Asian Session Recap

U.S. Session Recap

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