Article Highlights

  • Epiphany Day holiday in Italy today
  • Spanish services PMI: 55.1 vs. 56.9 expected, 56.7 previous
  • Italian services PMI: 55.3 vs. 53.8 expected, 53.4 previous
  • French final services PMI: 49.8 vs. 50.0 expected, 50.0 previous
  • German final services PMI: 56.0 vs. 55.4 expected, 55.4 previous
  • Euro Zone final services PMI: 54.2 vs. 53.9 expected, 53.9 previous
  • U.K. services PMI: 55.5 vs. 55.6 expected, 55.9 previous
  • Euro Zone PPI m/m: -0.2% as expected vs. -0.3% previous
  • FOMC meeting minutes will be released later
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Risk sentiment was the main driver for forex price action during today’s morning London trading session, so we had another lopsided battle between the safe-havens and the higher-yielding currencies.

Major Events:

Risk aversion domination – There were signs of risk-taking during yesterday’s afternoon London/U.S. forex session, but they quickly began to fade during today’s Asian forex session due to renewed jitters over China and North Korea’s allegedly successful testing of an H-bomb. That risk aversion then spilled over into today’s European forex session, with the pan-European FTSEurofirst 300 down by 1.49% to 1,389.39 and the DAX down by 1.74% to 10,130.80. U.S. equity futures are also signalling that risk aversion will persist into the U.S. trading session since the S&P 500 futures was down by 1.58% to 1,979.88 while Nasdaq futures 1.65% to 4,404.00.

Oil tumbles hard – The renewed jitters over China and continuing tensions between Iran and Saudi Arabia caused oil prices to fall to 11-year lows, with U.S. crude oil down by 2.60% to $35.05 per barrel and Brent crude oil down by a hefty 3.75% to $35.06 per barrel.

U.K. services PMI – The U.K. services PMI reading from Markit/CIPS registered a 55.5 reading, barely missing the 55.6 consensus and lower than the previous 55.9 reading. It’s still above the 50.0 neutral mark and the long-run average of 55.2, however, so the services sector is still doing A-okay. Since the services PMI reading was roughly within expectations, the pound’s forex moves ended up being dictated by opposing currency price action, ending the session mixed.

Major Currency Movers:

Safe-havens – The Japanese yen was the king (or queen if you like) of pips yet again due to the prevailing risk-off sentiment during the forex session. Surprisingly enough, the Swissy was finally getting some buyers again after two days of weakness, although Swissy pairs are actually range-bound if you consider the earlier trading session. As for the Greenback, it had a mixed performance during the session, probably because forex traders were waiting for the FOMC minutes and a U.S. forex session filled with lots of economic reports.

USD/JPY was down by 36 pips (-0.30%) to 118.37, CHF/JPY was down by 29 pips (-0.25%) to 117.34, AUD/JPY was down by 65 pips (-0.78%) to 83.74

USD/CHF was down by 5 pips (-0.05%) to 1.0087, AUD/CHF was down by 36 pips (-0.50%) to 0.7137, CAD/CHF was down by 22 pips (-0.30%) to 0.7161

Comdolls – The risk-off sentiment caused the higher-yielding comdolls to extend their losing spree, especially against the safe-haven currencies. The Aussie was particularly weak, probably because of its close trade relations with China. Heck, it even lost out to the other comdolls. Interestingly enough, Kiwi pairs were trading mostly sideways after dropping hard during the earlier Asian session. There were no catalysts for the Kiwi’s forex price action, however.

AUD/USD was down by 36 pips (-0.52%) to 0.7071, AUD/NZD was down by 34 pips (-0.32%) to 1.0646, AUD/CAD was down by 23 pips (-0.24%) to 0.9962

USD/CAD was up by 40 pips (+0.29%) to 1.4090, EUR/CAD was up by 53 pips (+0.43%) to 1.5138, GBP/CAD was up by 73 pips (+0.36%) to 2.0643

Watch Out For:

  • 1:15 pm GMT: U.S. ADP jobs report (198K expected, 217K previous)
  • 1:30 pm GMT: Canada’s trade balance (CAD -2.60B vs. CAD -2.76B previous)
  • 1:30 pm GMT: U.S. trade balance (-$44.0B expected, -$43.9B previous)
  • 2:45 pm GMT: Markit’s final U.S. services PMI (55.1 vs. 53.7 previous)
  • 3:00 pm GMT: U.S. factory orders (-0.2% expected, 1.5% previous)
  • 3:00 pm GMT: U.S. ISM non-manufacturing PMI (56.0 vs. 55.9 previous)
  • 7:00 pm GMT: FOMC meeting minutes; get it here when it come out

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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