U.S. Session Forex Recap – Sept. 30, 2016

  • U.S. final GDP reading upgraded from 1.1% to 1.4% for Q2
  • U.S. initial jobless claims at 254K vs. 260K consensus
  • U.S. goods trade deficit narrowed from $58.8B to $58.4B
  • U.S. pending home sales down 2.4% vs. projected 0.1% dip in Aug
  • Deutsche Bank clients started withdrawing funds

Investors were quick to hit the panic button when news about Deutsche Bank clients withdrawing large sums of money from the German bank hit the airwaves.

Major Events:

Deutsche Bank woes – Earlier this month, the German bank’s financial troubles became a major concern when it was slapped with billions in fines by the U.S. Justice Department. Since then, shares have tanked and a number of big hedge funds that trade derivatives with the bank have pulled out their funds.

Based on an internal document seen by Bloomberg News, hedge funds such as Millennium Partners, Rokos Capital Management, and Capula Investment Management have moved part of their listed derivatives holdings to other firms in order to reduce their exposure. However, bank representatives assured that this represents only a small part of their derivatives-clearing business.

What’s particularly worrisome about this is that Deutsche Bank has long-standing connections with the biggest financial institutions so investors and financial analysts are now buzzing about a potentially larger banking crisis if this escalates. Heck, some have even speculated that this fiasco could be big enough to warrant aid from the German government itself!

Mostly upbeat U.S. data – Economic figures from Uncle Sam came in mostly better than expected, with the exception of the pending home sales report, which indicated a 2.4% slump in August versus the projected 0.1% drop. It’s no secret that construction and housing activity slowed down last month, though, so no surprises there.

The rest of the figures came in the green, led by the upgrade in the Q2 GDP reading from 1.1% to 1.4% to indicate a faster pace of growth than initially reported. The goods trade deficit narrowed from $58.8 billion to $58.4 billion, reflecting a pickup in trade activity, instead of widening to $62.6 billion. Initial jobless claims came in at 254K, lower than the projected 260K figure.

Major Market Movers:

CHF – Since the Deutsche Bank crisis could have repercussions in Europe, the Swiss franc was able to rake in a lot of pips during the flight to safety in the region.

USD/CHF slipped from .9694 to a low of .9639, EUR/CHF tumbled from 1.0880 to a low of 1.0833, GBP/CHF dropped from 1.2622 to a low of 1.2522, and CHF/JPY popped up from 104.53 to a high of 105.21 before dropping back to 104.25.

Commodity currencies – The higher-yielding comdoll gang took a beating from their lower-yielding peers as risk aversion peeked back in the markets.

AUD/USD dropped from a high of .7679 to a low of .7623, USD/CAD popped up from 1.0379 to a high of 1.3184, NZD/USD fell from .7266 to a low of .7236, AUD/JPY is back down from 77.80 to a low of .7691, NZD/JPY is down from 73.91 to 73.04, and CAD/JPY retreated from 77.58 to 76.49.

Watch Out For:

  • 11:30 pm GMT: Japanese household spending y/y (-2.1% expected, -0.5% previous)
  • 11:30 pm GMT: Japanese unemployment rate (no change from 3.0% expected)
  • 11:30 pm GMT: Tokyo core CPI (-0.4% expected, -0.4% previous)
  • 11:30 pm GMT: Japanese national core CPI (-0.4% expected, -0.5% previous)
  • 11:50 pm GMT: Japanese preliminary industrial production (+0.5% expected, -0.4% previous)
  • 12:00 am GMT: BOJ Governor Kuroda’s testimony
  • 12:00 am GMT: New Zealand ANZ business confidence (15.5 previous)
  • 1:00 am GMT: Australia HIA new home sales (-9.7% previous)
  • 1:30 am GMT: Australia private sector credit (0.5% expected, 0.4% previous)
  • 1:45 am GMT: Chinese Caixin manufacturing PMI (50.1 expected, 50.0 previous)

See also:

London Session Recap

Asian Session Recap

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