Article Highlights

  • German final CPI y/y: no revision at 0.3% as expected
  • German final HICP y/y: no revision at 0.2% as expected
  • French HICP y/y: 0.1% as expected vs. -0.4% previous
  • Euro Zone industrial production m/m: -0.3% vs. -0.1% expected, -0.4% previous
  • Euro Zone industrial production y/y: 1.7% vs. 1.3% expected, 2.2% previous
  • Lots of central banker speakers for the upcoming forex session
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The euro was on the hot seat during today’s morning London forex session, thanks to ECB Draghi’s speech. Meanwhile, the safe-havens and the higher-yielders were fighting it out in the background.

Major Events:

ECB Draghi’s dovish speeches – In his first speech, which you can read here, Super Mario Draghi said that “Signs of a sustained turnaround in core inflation have somewhat weakened” and that “a sustained normalisation of inflation could take longer than [ECB officials] anticipated.”

Draghi also said that the ECB is ready to extend their QE program beyond September 2016 if they “do not see a sustained adjustment in the path of inflation.” Finally, Draghi reiterated that “Other instruments could also be activated … if necessary.” And, as Forex Gump pointed out in his write-up for the latest ECB press conference, that includes further rate cuts apparently.

As for the second speech, his central message was essentially the same, which is probably why the market reacted to the first speech but barely budged during the second one.

Euro zone industrial productionIndustrial production in the euro zone decreased by 0.3% during the September period due mainly to a 3.9% decline in the the production of durable consumer goods and a 1.0% slide in the production of non-durable goods. On an annualized basis, however, industrial production actually rose by 1.7%, which is better than the expected 1.3% increase. The rise was apparently due to a 2.6% increase in durable goods production and capital goods advancing by 2.2%.

Risk aversion is back – The risk-on sentiment from yesterday’s European forex session was chased away and risk aversion took its place, kicking the pan-European FTSEurofirst 300 down by 0.58% to 1,485.54. The DAX was also down by 0.48% to 10,855.50, and US equity futures were slightly dipping their toes in red ink (figuratively speaking, of course), with the S&P 500 Futures down by 0.05% to 2,068.00 and NASDAQ futures down by 0.08% to 4,628.12 during the forex session.

Major Currency Movers:

EUR – ECB Draghi’s first dovish speech dragged (hehe) euro pairs lower across the board due, perhaps, to speculation of further easing moves given that Draghi reiterated the ECB’s readiness to extend its QE program and “activate” other measures “if necessary.” However, the euro later found some support when the euro zone’s industrial production readings came out, probably because forex traders were more focused on the better-than-expected annualized reading.

EUR/USD was down by 38 pips (-0.36%) to 1.0714, EUR/JPY was down by 42 pips (-0.32%) to 131.79, EUR/CHF was down by 31 pips (-0.29%) to 1.0756

CAD – The prevailing risk-off sentiment naturally dampened demand for the high-yielding comdolls. Heck, even the mighty Aussie failed to extend its gains from the earlier session. In fact, it was giving back some of its gains to the safe-havens in particular, with AUD/USD down by 10 pips (-0.14%) to 0.7131.

Anyhow, the weakest currency among the comdolls appears to have been the Loonie, thanks perhaps to sliding oil prices, with Brent crude oil down by 0.29% to $46.48 per barrel and US crude oil down by 0.52% to $42.70 per barrel during the session.

USD/CAD was up by 39 pips (+0.30%) to 1.3307, NZD/CAD was up by 15 pips (+0.17%) to 0.8698, AUD/CAD was up by 15 pips (+0.16%) to 0.9489

CHF – Among the safe-havens, the Swissy was apparently the currency of choice for forex traders to run to during the forex session since it had the most volatility and it was winning out against its fellow safe-havens.

USD/CHF was down by 14 pips (-0.14%) to 1.0048, CHF/JPY was up by 15 pips (+0.13%) to 122.45, GBP/CHF was down by 24 pips (-0.16%) to 1.5252

Watch Out For:

  • Canadian house price index (0.2% expected, 0.3% previous) at 1:30 pm GMT
  • US initial jobless claims (270K expected, 276K previous) also at 1:30 pm GMT
  • US Fed Chair Janet Yellen is scheduled to give a brief speech at 2:30 pm GMT
  • Chicago Fed President Charles Evans will talk about the economy and monetary policy at 3:15 pm GMT
  • US crude oil inventories (0.8M expected, 2.8M previous) at 4:00 pm GMT; do note that this tends to affect CAD rather than USD
  • MPC Member And Haldane will give a speech at 5:00 pm GMT
  • New York Fed President William Dudley will also talk about the economy and monetary policy at 5:15 pm GMT
  • US Federal budget (-$131.5 billion expected, $91.1 billion previous)

See also:

Asia Session Recap

U.S. Session Recap

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

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