- No economic data released during the London session
- Chinese equity market dropped by 8.5%
The forex calendar for today’s morning London forex session was literally empty, but that didn’t stop forex traders from pumping the market with large amounts of volatility.
Risk aversion was still the name of the game due to renewed growth concerns brought about by the massive selloff in Chinese equities market, which dropped by around 8.5% for the day – the worse ever drop since 2007. Apparently, the drop was only limited because trading on many companies were still suspended. In addition, exchange rules limit the losses of listed companies to 10% per day.
The risk-off sentiment naturally caused forex traders to flee to the safe-haven currencies, namely, the Swiss franc and the Japanese yen, with the yen being the stronger of the two. The U.S. dollar is considered a safe-haven too, but forex traders had little love for the Greenback since China’s woes fueled new concerns that the Fed would no longer be in a position to hike rates.
CHF/JPY is down by 52 pips (-0.41%) to 127.79, USD/CHF is down by 63 pips (-0.67%) to 0.9359, USD/JPY is down by 122 pips (-1.01%) to 119.71
Just as the sun naturally rises in the east, so too was it natural for the high-yielding comdolls to fall victim to the prevailing risk-off sentiment. Furthermore, the Chinese stock rout gave commodity traders the jitters, putting a squeeze on many of them. Brent crude oil, for example, was down by 3.94% to $43.67 per barrel during the session, which is the first time that price went below $45 per barrel since March 2009 and very bad news for the Loonie. Even gold declined by 0.53% to $1,153.50 per troy ounce, which is painful news for the Aussie.
AUD/JPY is down by 94 pips (-1.08%) to 86.60, NZD/JPY is down by 122 pips (-1.53%) to 78.57, CAD/JPY is down by 92 pips (-0.98%) to 90.39
As for the euro, it was mixed for the forex session. And based on how price action for the various euro pairs went down, it looks like the euro was being kicked around by opposing currency price action. The DAX’s 4.03% drop to 9,716.30 during the forex session apparently didn’t convince euro bears to cause a broad euro selloff.
EUR/USD is up by 39 pips (+0.34%) to 1.1503, EUR/JPY is down by 89 pips (-0.65%) to 137.77, EUR/AUD is up by 74 pips (+0.47%) to 1.5915
Perhaps the most interesting currency during the entire forex session was the pound since most pound pairs were surging higher even though there weren’t any direct catalyts that could account for the pound’s strength. The pound was even putting up a fight against the yen and the franc despite the FTSE 100’s 3.90% drop to 5,946.30. Perhaps forex traders saw Forex Gump’s economic data roundup for U.K.? I’m half serious on that one because the CBI upgraded its GDP growth expectations to 2.6% this year and 2.8% next year from 2.4% this year and 2.5% next year. If you add the fact that the U.K. is expected to show the highest GDP growth among the G7 economies, and you mix the deteriorating hopes of a rate hike in the U.S., then the pound looks very attractive indeed.
GBP/USD is up by 111 pips (+0.71%) to 1.5742, GBP/CAD is up by 147 pips (+0.71%) to 2.0860, GBP/NZD is up by 301 pips (+1.27%) to 2.3988
The forex calendar for the upcoming afternoon London/morning U.S. session is going to be empty again, so perhaps risk-sentiment will be the continuing factor.
Do note that Federal Reserve Bank of Atlanta President Dennis Lockhart has a speech way late into the U.S. forex session at around 8:55 pm GMT. Make sure to tune in since his speech is practically the only event around, so other forex traders would probably be tuning in as well. Stay frosty!
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