London Session Forex Recap – Nov. 29, 2016

  • German import price index m/m: 0.9% vs. 0.6% expected, 0.1% previous
  • German import price index y/y: -0.6% vs. -0.8% expected, -1.8% previous
  • French Q3 flash GDP q/q: unchanged at 0.2% as expected
  • French Q3 flash GDP y/y: unchanged at 1.1% as expected
  • U.K. mortgage approvals: 67.5K vs. 65.0K expected, 63.6K previous
  • U.K. net lending to individuals: £4.9B vs. £4.8B expected, £4.7B previous
  • Euro Zone industrial sentiment: -1.1 vs. -0.5 expected, -0.6 previous
  • Euro Zone consumer sentiment: unchanged at -6.1 as expected
  • German HICP m/m: 0.0% vs. 0.1% expected, 0.2% previous
  • German HICP y/y: 0.7% vs. 0.8% expected, 0.7% previous

The pound soared during today’s morning London session, apparently on positive data. Meanwhile, the broad-based retreat in commodities and risk-on vibes respectively took their toll on the Aussie and yen.

Major Events/Reports:

The BOE’s Money and Credit report – The BOE released its Money and Credit report for the October period earlier today. And one of the more interesting and important indicators there is the number of mortgage approvals, which came in at 67.5K, beating the consensus reading of 65.0K.

In addition, October’s reading is better than the previous month’s 63.6K and is the best reading since the 70.0K printed in March of this year. The better-than-expected reading reinforces the current uptrend. More importantly, the reading implies that the U.K. housing market is still relatively healthy, despite the Brexit referendum.

Moving on, another important indicator is net lending to individuals, which printed an increase of £4.9B. This is better than the expected £4.8B increase, as well as the £4.7B increase recorded during the previous month. This indicator shows that consumer credit is still strong, which could mean that consumer spending is also strong.

ECB rumors from Reuters – According to a Reuters article that cited four unnamed “central bank sources,” the ECB is supposedly ready to step in and buy Italian government bonds if this Sunday’s Italian referendum would result in a bond sell-off that would then pump up debt-ridden Italy’s borrowing costs.

If true, this would help to calm any unwanted financial volatility due to the potential political turmoil if the “No” camp wins. These unnamed sources stressed that aid from the ECB would only be temporary, though, “limited to days or weeks, to counter any immediate market volatility, because the asset-purchase program was designed to shore up inflation and economic growth in the entire euro zone and was not intended to fight crises in individual countries.”

Commodities tumbleCommodities got routed during today’s morning London session after a strong showing yesterday.

Precious metals were beaten down.

  • Gold was down by 0.45% to $1,185.50 per troy ounce
  • Silver was down by 0.49% to $16.593 per troy ounce

Base metals, meanwhile, got a good hammering.

  • Copper was down by 1.52% to $2.630 per pound
  • Nickel was down by 1.28% to $11,370.00 per dry metric ton

As for oil benchmarks, they dropped rather hard.

  • U.S. crude oil was down by 1.93% to $46.17 per barrel
  • Brent crude oil was down by 1.79% to $48.33 per barrel

The broad-based commodities rout was likely due to a mix of profit-taking after last week’s commodities rally. Another likely factor for the rout is the Greenback’s recent strength, since globally-traded commodities are generally prices in U.S. dollars, so a stronger Greenback means more expensive commodities. For reference, the USD index was up by 0.17% to 101.38 for the day when the morning London session ended.

Market analysts also said as much. Although some market analysts also say that the hard slump in oil prices during the session was due to lack of faith in OPEC’s planned production cut ahead of tomorrow’s OPEC meeting.

Signs of risk-taking – European equities had a soft start, but signs of risk-taking soon began to appear. As a result, most of the major European equity indices were able to reverse their earlier losses to end the session with modest gains.

  • The pan-European FTSEurofirst 300 was up by 0.16% to 1,342.22
  • The blue-chip Euro Stoxx 50 was up by 0.45% to 3,028.00
  • Germany’s DAX was up by 0.05% to 10,588.00

U.S. equity futures also got some support after an early dip.

  • S&P 500 futures were up by 0.11% to 2,203.25
  • Nasdaq futures were up by 0.10% to 4,865.62

Banking shares led the early drop and later recovery, market analysts say. And the roller coaster price action of banking shares was apparently due to the Reuters report that I mentioned earlier.

 Major Market Movers:

GBP – The pound was the one currency to rule them all during today’s morning London session, as well as the for the entire day itself (so far). The pound had actually had a mixed start when the session finally rolled around, but got a broad-based bullish infusion when the BOE released its Money and Credit report, which was already discussed earlier.

GBP/USD was up by 68 pips (+0.55%) to 1.2470, GBP/JPY was up by 151 pips (+1.08%) to 140.79, GBP/AUD was up by 144 pips (+0.87%) to 1.6737

NZD – The Kiwi has been gaining ground against most of its peers since the earlier Asian session. And the Kiwi extended those gains during the morning London session, ending up as the second strongest currency after the mighty pound. Aside from demand for higher-yielders due to the risk-on vibes, there’s wasn’t really any fundamentals-based reason for the Kiwi’s sustained strength. Although it’s possible that Kiwi long are opening preemptive positions or Kiwi shorts are bailing out ahead of the RBNZ’s Financial Stability report for later.

NZD/USD was up by 10 pips (+0.15%) to 0,7097, NZD/JPY was up by 53 pips (+0.65%) to 80.12, NZD/CHF was up by 26 pips (+0.36%) to 0.7210

AUD – The returning appetite for risk didn’t seem to stoke demand for the higher-yielding Aussie. Heck, it even ended up as the second worst-performing currency of the session after the yen. There were no apparent catalysts for the Aussie’s weakness, but the broad-based commodities rout likely weighed down on the comdoll.

AUD/USD was down by 23 pips (-0.23%) to 0.7450, AUD/CHF was down by 8 pips (-0.11%) to 0.7568, AUD/NZD was down by 48 pips (-0.46%) to 1.0496

JPY – The returning risk-on vibes was toxic for the safe-haven yen, so much so that it ended up as the weakest currency of the session.

USD/JPY was up by 58 pips (+0.52%) to 112.88, EUR/JPY was up by 43 pips (+0.37%) to 119.53, AUD/JPY was up by 17 pips (+0.21%) to 84.12

Watch Out For:

  • 1:30 pm GMT: U.S. preliminary Q3 GDP (upgrade from 2.9% to 3.0% expected)
  • 1:30 pm GMT: Canada’s current account (-$16.50B expected, -$19.86B previous)
  • 2:00 pm GMT: S&P/Case-Shiller HPI (5.20% expected, 5.13% previous)
  • 2:15 pm GMT: New York Fed President William Dudley has a speech
  • 3:00 pm GMT: CB U.S. consumer sentiment (101.3 expected, 98.6 previous)
  • 5:40 pm GMT: U.S. Fed Governor Jerome Powell is scheduled to speak
  • 8:00 pm GMT: RBNZ financial stability report will be released

See also:

Asian Session Recap

U.S. Session Recap

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