Article Highlights

  • French flash manufacturing PMI: 50.0 vs. 51.3 expected, 51.4 previous
  • French flash services PMI: 50.6 vs. 50.1 expected, 49.8 previous
  • German flash manufacturing PMI: 52.1 vs. 53.0 expected, 53.2 previous
  • German flash services PMI: 55.4 vs. 55.5 expected, 56.0 previous
  • Euro Zone flash manufacturing PMI: 52.3 vs. 53.0 expected, 53.2 previous
  • Euro Zone flash services PMI: 53.6 vs. 54.2 expected, 54.2 previous
  • U.K. retail sales m/m: -1.0% vs. -0.3% expected, 1.3% previous
  • U.K. core retail sales m/m: -0.9% vs. -0.3% expected 1.3% previous
  • U.K. public borrowing: £6.9B vs. £10.1B expected, £12.9B previous
  • U.K. public borrowing (banks excluded): £7.5B vs. £10.5B expected, £13.5B previous
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Oil continued surging higher during the morning London forex session, so European forex traders hopped aboard the Loonie train. In addition, forex traders also looked to risk sentiment for overall direction.

Major Events:

Lots of risk-taking – The morning London forex session was like spring since everything was in the green, with the pan-European FTSEurofirst 300 was up by 2.70% to 1,328.94 while the DAX was up by 2.13% to 9,778.00. U.S. equity futures were also looking pretty swanky, with the S&P 500 futures up by 1.37% to 1,886.50 and the Nasdaq futures up by 1.70% to 4,200.50 during the forex session.  Market analysts attributed the risk-taking during the session to continued optimism over the ECB’s hints of more easing down the road.

Oil surges above $31 per barrel – Oil surged higher for the second straight day, erasing losses for the week and then some. U.S. WTI crude oil was up by a very solid 5.47% to $31.20 per barrel while Brent crude oil was up by 6.80% to $31.26 per barrel during the forex session. Many market analysts attributed the sudden surge in oil prices to improved sentiment in the global equities market and speculation that demand for oil will pick up due to a cold front over the U.S. and Europe.

Poor Euro Zone PMI readings – France set the tone by printing a 50.0 reading for its manufacturing PMI when the consensus was a downtick to 51.3 from 51.4. French services PMI was a little better since printed a better-than-expected 50.6, an improvement over the previous 49.8 reading. Germany then printed its manufacturing and services PMI, and both readings were a disappointment. Finally, the manufacturing and services PMI readings for the entire euro zone were released and they were disappointments, too. On a more upbeat note, the PMI readings are all still above the 50.0 mark, so the manufacturing and services sectors in the euro zone are still expanding. The poor readings didn’t seem to have that much of an impact on the euro, however, since euro pairs had a mixed performance.

U.K. retail sales – The retail sales volume in the U.K. during the December period decreased by 1.0% month-on-month and while the amount spent decreased by 1.4%. The previous reading for the retail sales volume was also downgraded from 1.7% to 1.3% due to the “incorporation of late data.” On an annualized basis, retail sales volume grew by 2.6%, marking the 32nd consecutive month of growth, but the amount spent decreased by 1.0% due to low inflation levels.

Lower U.K. public deficit – The U.K. had a £7.5 billion shortfall in its finances back in December, but this is £3 billion smaller than the £10.5 billion that most market analysts were expecting, and an improvement over the previous month’s £13.5 billion hole. Also, the current deficit is £4.3 billion smaller when compared with the figure for December 2014.

Major Currency Movers:

CAD – The risk-on sentiment and the surge in oil prices made the Loonie the king (or queen, if you like) of pips during the forex session.

USD/CAD was down by 94 pips (-0.66%) to 1.4159, NZD/CAD was down by 89 pips (-0.96%) to 0.9221, AUD/CAD was down by 43 pips (-0.44%) to 0.9959

GBP – The pound started the morning London trading session by climbing higher. It then tried to go back down as forex traders priced-in the disappointing retail sales report. More traders were probably looking at the upbeat report for U.K. public sector finances, however, since pound pairs continued grinding higher after that, losing out only to the mighty Loonie.

GBP/USD was up by 92 pips (+0.65%) to 1.4325, GBP/JPY was up by 127 pips (+0.76%) to 169.32, GBP/NZD was up by 195 pips (+0.90%) to 2.1975

CHF – All the safe-haven currencies (CHF, JPY, USD) were a bit under the weather due to prevailing risk-on sentiment during the forex session, but the Swissy was noticeably the weakest of them all. There were no catalysts for the Swissy, so I’ll point to the usual suspect – the SNB and its policy of weakening the Swissy.

USD/CHF was up by 27 pips (+0.27%) to 1.0126, GBP/CHF was up by 126 pips (+0.88%) to 1.4499, EUR/CHF was up by 23 pips (+0.21%) to 1.0962

NZD – Despite the risk-taking during the forex session, the Kiwi remained pretty weak. Heck, the Kiwi even lost out to the Swissy, which makes the Kiwi the weakest currency during the forex session. It did begin to get some buyers across the board near the end of the session, though.

NZD/USD was down by 26 pips (-0.41%) to 0.6506 with 0.6482 as session low, NZD/JPY was down by 25 pips (-0.33%) to 76.87 with 76.61 as session low, NZD/CHF was down by 15 pips (-0.24%) to 0.6580 with 0.6536 as session low

Watch Out For:

  • 1:30 pm GMT: Canada’s headline (-0.3% expected, -0.1% previous) and core (-0.3% expected, -0.3% previous) CPI readings
  • 1:30 pm GMT: Canada’s headline (0.3% expected, 0.1% previous) and core (0.4% expected, 0.0% previous) retail sales reading
  • Forex Gump has a write-up for the above Canadian reports (read it here)
  • 2:45 pm GMT: Markit’s flash U.S. manufacturing PMI (51.0 expected, 51.2 previous)
  • 3:00 pm GMT: U.S. existing home sales (5.20M expected, 4.76M previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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