London Session Forex Recap – Nov. 28, 2016

  • Italian business confidence: 102.0 vs. 102.9 previous
  • Italian consumer confidence: 107.9 vs. 108.0 previous
  • Euro Zone private loans y/y: 1.8% vs. 1.9% expected, 1.8% previous

The pound and the euro both got slapped lower during today’s morning London session. The commodities rally, meanwhile, enticed traders to load up on the comdolls, with the Loonie having noticeably high demand.

Major Events/Reports:

A possible Brexit challenge emerges – Earlier today, the BBC released a Brexit-related report. The gist of it is that lawyers from a think tank called “British Influence” are arguing that triggering Article 50 of the TEU would not be enough to get the U.K. out of the single market. These lawyers then suggest that Article 127 of the EEA also has to be triggered.

Commodities climb – Commodities are starting the trading week on a good footing, with almost all commodities printing decent gains.

Precious metals were feeling the love.

  • Gold was up by 1.03% to $1,190.50 per troy ounce
  • Silver was up by 1.26% to $16.763 per troy ounce

Base metals were also broadly in the green.

  • Copper was up by 0.99% to $2.708 per pound
  • Nickel was up by 0.60% to $11,750.00 per dry metric ton

Oil benchmarks were in the red at the start, but managed to climb back into positive territory.

  • U.S. crude oil was up by 0.35% to $46.22 per barrel
  • Brent crude oil was up by 0.33% to $48.40 per barrel

The broad-based commodities rally may have been triggered by the Greenback’s early dip. Although what sustained the commodities rally is probably another thing together, since the Greenback regained strength during the course of the morning London session, with the USD index slightly up by 0.07% to 101.54.

Anyhow, the large gains printed by precious metals were likely fueled by safe-haven demand. Precious metals, such as gold, are considered traditional safe-havens after all.

Market analysts, meanwhile, offered differing views for base metals, with some falling back to the standard explanation that a Trump victory is fueling speculation that demand for base metals will rise, while others pointed to short covering. A few were honest enough to admit that they can’t pinpoint a fundamentals-based reason for the rally.

As for oil’s roller coaster price action, market analysts were pretty unanimous in blaming the early dip to wavering faith in OPEC’s planned production deal. As for the later recovery, there’s no clear reason yet, but one report making the rounds at the time is that Iraqi Oil minister Jabbar al-Luaibi supposedly said that he’s “optimistic” on an OPEC deal, and more importantly, that Iraq is ready and willing to “cooperate” in the said deal.

Skittishness to start the week – There was a noticeable lack of risk-taking in Europe during today’s morning London session. As such, most of the major European equity indices ended up leaking red.

  • The pan-European FTSEurofirst 300 was down by 0.81% to 1,340.75
  • The blue-chip Euro Stoxx 50 was down by 0.65% to 3,027.00
  • Germany’s DAX was down by 0.88% to 10,605.10
  • The U.K.’s FTSE 100 was down by 0.68% to 6,794.00

U.S. equity futures also got infected by the risk-off mood.

  • S&P 500 futures were down by 0.31% to 2,204.50
  • Nasdaq futures were down by 0.24% to 4,856.88

Banking shares were leading the way down, with oil shares also down in the dumps, market analysts say. The slide in oil shares was likely due to the early slide in oil prices on worries over the OPEC deal, which I already mentioned earlier. The slide in banking shares, meanwhile, was apparently due to jitters ahead of the Italian referendum and the possibility of a so-called Italeave.

 Major Market Movers:

GBP – The pound was the weakest currency of today’s morning London session. However, other than profit-taking after last week’s strong performance, there was really no clear reason why. Although it’s possible that the pound’s slide was a delayed reaction to the Brexit-related report that I mentioned earlier. After all, if what the lawyers in that report said is true, then that means a possible delay in starting the actual Brexit process and more Brexit-related uncertainty.

GBP/USD was down by 103 pips (-0.82%) to 1.2394, GBP/CHF was down by 20 pips (-0.16%) to 1.2585, GBP/AUD was down by 65 pips (-0.39%) to 1.6625

EUR – The euro initially showed strength, likely because of the risk-off vibes. However, the euro later got swamped by sellers. There were no direct catalysts, but it’s possible that we’re seeing some preemptive positioning ahead of Draghi’s testimonies later. It’s also possible that the possibility of a so-called Italeave, which market analysts say was dragging down equities, also caused investors to worry about the overall health of the Euro Zone banking system.

EUR/USD was down by 73 pips (-0.70%) to 1.0582, EUR/AUD was down by 35 pips (-0.25%) to 1.4197, EUR/CAD was down by 101 pips (-0.70%) to 1.4261

CAD – The Loonie had a mixed start, but showed strength despite the early dip in oil prices. Later, when oil bulls came back into the fray, the Loonie got a major bullish infusion that sent it higher against all its forex rivals.

GBP/CAD was down by 139 pips (-0.83) to 1.6702, AUD/CAD was down by 46 pips (-0.46%) to 1.0044, NZD/CAD was down by 61 pips (-0.64%) to 0.9502

Watch Out For:

  • 2:00 pm GMT: ECB President Mario Draghi will testify before the European Parliament’s Economic Committee
  • 4:00 pm GMT: ECB President Mario Draghi has another testimony, this time before the Committee on Economic and Monetary Affairs

See also:

Asian Session 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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