London Session Forex Recap – Jan. 11, 2017

  • U.K. industrial production m/m: 2.1% vs. 1.0% expected, -1.1% previous
  • U.K. industrial production y/y: 2.0% vs. 0.7% expected, -0.6% previous
  • U.K. manufacturing production m/m: 1.3% vs. 0.5% expected, -1.0% previous
  • U.K. manufacturing production y/y: 1.2% vs. 0.4% expected, -0.5% previous
  • U.K. construction output m/m: -0.2% vs. 0.3% expected, -0.6% previous
  • U.K. goods trade balance: -£12.2B vs. -£11.2B expected, -£9.9B previous
  • BOE Guv’nah Mark Carney and company will testify before the Treasury Select Committee
  • The Donald has a press conference at Trump Tower

Price action was rather choppy during today’s morning London session. However, the euro was clearly and broadly in retreat. Meanwhile, the Greenback was broadly advancing, supposedly on speculation that Trump will give a pro-growth message later.

Major Events/Reports:

U.K. industrial output jumps – After dropping sharply in October, total industrial production in the U.K. surged by 2.1% month-on-month in November, which is more than double the expected 1.0% rebound. The increase in November is the fastest in six months and also ends three straight months of negative readings.

The main drivers for the surge in output were the 10.3% surge in crude and natural gas output and the 1.3% increase in total manufacturing output, which respectively added 1.00% and 0.91% to total industrial output.

Year-on-year, industrial production jumped by 2.0%, a four-month high. In addition, the reading is significantly better than the expected 0.7% rate of increase. And looking at the breakdown, the 1.2% rise in manufacturing output was the primary driver, adding 0.83% to total industrial output. This is followed by the 7.1% growth in the water production sector, which added 0.54% to total industrial output. The 4.9% growth in electricity and gas production came in third, adding 0.47% to total industrial output.

U.K. trade disappointsThe U.K.’s trade deficit in November was £4.2 billion, which is £2.6 billion wider than the deficit that was reported in October. The wider trade gap was due to primarily to the wider deficit in trade in goods (-£12.2B vs. -£11.2B expected, -£9.9B previous).

However, exports in goods actually grew by 2.8% month-on-month to £27,011 million. It just so happens that imports from the E.U. grew significantly more, by 8.4% to £39,174 million to be more exact. With regard to trade with the E.U., exports to the E.U. grew by 8.70% to £13,368 million while imports grew by 9.40% to £21,954 million. The U.K. is therefore still a net importer to the E.U. while the E.U. is a net exporter to the U.K.

U.K. construction output falls – Construction output in the U.K. fell for the second consecutive month, dipping by 0.2% in November, instead of recovering by 0.3% as expected. According to the construction output report, the dip was “largely due to a contraction in non-housing repair and maintenance.” New work, meanwhile, increased, “with new housing output continuing to grow.”

Risk appetite sticks around – After making a comeback yesterday, risk appetite stuck around for another day, so European equity indices were well supported.

  • The pan-European FTSEurofirst 300 was up by 0.21% to 1,442.34
  • Germany’s DAX was up by 0.18% to 11,603.75
  • The U.K.’s FTSE 100 was up by 0.18% to 7,288.50

Market analysts say that the upbeat mood was due to positive reports for retailers, which boosted other retail stocks and improved overall risk sentiment.

Major Market Movers:

EUR – The risk-on mood took its toll on the lower-yielders, with the euro getting the brunt of it, since the euro was the worst-performing currency of the session.

EUR/USD was down by 57 pips (-0.54%) to 1.0500, EUR/JPY was down by 44 pips (-0.36%) to 122.08, EUR/CHF was down by 52 pips (-0.38%) to 1.3911

USD – The Greenback steadily took ground against its peers during the morning London session. There were no apparent catalysts for the Greenback and U.S. bond yields were mostly in the red. However, some market analysts attributed demand for the Greenback to speculation that Trump will give a pro-growth message in his press conference later.

USD/JPY was up by 20 pips (+0.18%) to 116.25, USD/CAD was up by 21 pips (+0.16%) to 1.3247, USD/CHF was up by 51 pips (+0.505) to 1.0208

Watch Out For:

  • 2:15 pm GMT: BOE Guv’nah Mark Carney and company will testify before Treasury Select Committee
  • 3:00 pm GMT: NIESR U.K. GDP estimate (0.4% previous)
  • 3:30 pm GMT: U.S. crude oil inventories (0.9M expected, -7.1M previous)
  • 4:00 pm GMT: The Donald has a press conference at Trump Tower
  • 6:20 pm GMT: New York Fed President William Dudley has a speech

See also:

Asian Session Recap 
U.S. Session Recap

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

In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis.

Head on to Big Pippin’s Daily Chart Art for some pip-locking technical weeks!