Article Highlights

  • German jobless rate: steady at 6.3% as expected
  • German unemployment change: -14K vs. -8K expected, -14K previous
  • U.K. construction PMI: 57.8 vs. 56.0 expected, 55.3 previous
  • Euro Zone flash HICP y/y: 0.2% vs. 0.4% expected, 0.2% previous
  • Euro Zone flash core HICP y/y: 0.9% vs. 1.0% expected, 0.9% previous
  • Dairy auction currently underway
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Risk aversion was still the name of the game during today’s morning London forex session, so the Greenback and the Japanese yen were really dominating. But which of the two safe-haven currencies was the one currency that ruled them all (during this forex  session)?

Major Events:

Risk aversion persists – While not as severe when compared to yesterday, risk aversion just won’t go away, with the pan-European FTSEurofirst 300 down by 0.37% to 1,395.93 and the DAX down by 0.75% to 10,209.30 during the forex session. U.S. equity futures were also getting burned by the risk-off sentiment, with the S&P 500 futures down by 0.65% to 1,996.00 and Nasdaq futures down by 0.64% to 4,475.50. Most market analysts attributed the continuing risk aversion to worries over China.

Oil dips – Oil was feeling the combined weight of a stronger U.S. dollar and jitters over China since U.S. crude oil was down by 0.34% to $36.63 per barrel while Brent crude oil was down by 0.54% to $37.02 per barrel during the forex session.

Positive U.K. construction PMI – After a disappointing manufacturing PMI report during yesterday’s London trading session, forex traders got a treat today since U.K construction PMI came in better-than-expected, with commentary from the Markit/CIPS report stating that “Commercial construction rises at fastest pace since October 2014.” Also, 51% of survey respondents “anticipate a rise in business activity over the course of 2016.” Good news indeed. It wasn’t able to muster a lot of buyers for the pound, however, probably because the risk-off sentiment was weighing down on the higher-yielding pound.

Euro Zone HICP fails to meet expectations – The flash estimates for the euro zone’s inflation readings failed to meet market expectations of a 0.4% increase for the headline reading and a 1.0% increase for the core reading. A quick look at the report shows that services ticked lower to 1.1% (1.2% previous) while food, alcohol, and tobacco prices only increased by 1.2% (1.5% previous). On a slightly more upbeat note, energy prices were less of a drag (-5.9% vs. -7.3% previous).

Major Currency Movers:

USD & JPY – The prevailing risk-off sentiment convinced forex traders to flee to the safe-haven currencies yet again. Like yesterday’s London forex session, the Japanese yen was the one currency to rule them all yet again since it gave the Greenback a mighty good bashing.

USD/JPY was down by 53 pips (-0.45%) to 118.88, CHF/JPY was down by 116 pips (-0.98%) to 117.79

USD/CHF was up by 57 pips (+0.585) to 1.0095, USD/CAD was up by 30 pips (+0.22%) to 1.3938

AUD – The risk aversion that dominated the forex session was most unkind to the Aussie since it lost out to most of its forex rivals. As for the other comdolls, the Kiwi’s forex price action was more mixed while the Loonie showed some strength despite the dip in oil prices. The Kiwi’s price action was likely due to preemptive positioning ahead of the dairy auction, but there were no apparent catalysts for the Loonie’s resilience.

AUD/USD was down by 38 pips (-0.52%) to 0.7168, AUD/JPY was down by 85 pips (-0.99%) to 85.20, AUD/NZD was down by 27 pips (-0.25%) to 1.0677

EUR – The euro started the forex session on a weak footing despite a positive jobs report from Germany the risk-off sentiment. The euro couldn’t get a break, however, since its weakness only intensified when the disappointing inflation report came out.

EUR/USD was down by 52 pips (-0.48%) to 1.0756, EUR/JPY was down by 119 pips (-0.93%) to 127.85, EUR/CAD was down by 50 pips (-0.33%) to 1.4981

CHF – The Swissy had a repeat performance as the weakest currency during today’s London forex session despite being a safe-haven currency. There weren’t any catalysts for the Swissy’s broad weakness, but I wouldn’t rule out the possibility of an SNB intervention.

AUD/CHF was up by 10 pips (+0.14%) to 0.7243, NZD/CHF was up by 21 pips (+0.32%) to 0.6777, EUR/CHF was up by 13 pips (+0.12%) to 1.0862

Watch Out For:

  • 1:30 pm GMT: Canadian raw materials price index (-2.0% expected, 0.4% previous)
  • 1:30 pm GMT: Canadian industrial production price index (0.1% expected, -0.5% previous)
  • 10:30 pm GMT: AIG Australian services index (48.2 previous)
  • Dairy auction currently underway (+1.9% previous), so keep an eye on the Kiwi; auction results are usually out by 2:00 pm GMT (1:52 pm GMT previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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