- French current account: -€0.7B vs. -€1.4B previous
- French industrial production m/m: -1.6% vs. 0.3% expected, -0.9% previous
- French manufacturing production m/m: -0.8% vs. 0.3% expected, 0.6% previous
- Italian industrial production m/m: -0.7% vs. 0.3% expected, -0.5% previous
- U.K. industrial production m/m: -1.1% vs. -0.1% expected, -0.8% previous
- U.K. manufacturing production m/m: -0.2% vs. 0.1% expected, -0.3% previous
- U.K. industrial production y/y: -0.4% vs. 1.0% expected, 0.7% previous
- U.K. manufacturing production y/y: -1.7% vs. -1.4% expected, -1.2% previous
Risk appetite made a major comeback during today’s morning London forex session, so the safe-havens and the lower-yielding euro had a reversal of fortune against the higher-yielders. Can you guess which higher-yielding currency was the one currency that ruled them all?
U.K. industrial production report – Industrial production in the U.K. for the December period was just terrible, contracting by 0.4% on an annualized basis instead of advancing by 1.0%. The month-on-month reading is just as terrible, falling by 1.1% when it was expected to only slide by 0.1%. Naturally, pound pairs got clobbered across the board when the report came out. But a look at the section on how the industrial production reading will impact Q4 2015 GDP growth shows that it will only have an impact of “less than 0.1 percentage points” on the preliminary Q4 2015 GDP reading, which is probably why the selloff was short-lived.
Oil rallies – Oil prices were in full rally mode during the forex session, with U.S. crude oil up by 2.20% to $28.55 per barrel and Brent crude oil up by 2.04% to $30.94 per barrel after both benchmarks got pummeled hard by yesterday’s IEA report.
The rally was sparked by comments from Iran’s Oil Minister Bijan Zangeneh that Iran is ready to negotiate with Saudi Arabia. A later report that Igor Sechin, Russia’s oil baron, proposed cutting oil production by one million barrels per day also apparently kept the rally going. Sechin didn’t say that Russia was gonna cut back on production, however.
Risk appetite returns – The doom and gloom of the past few days were finally chased away during today’s morning London forex session, with the pan-European FTSEurofirst 300 up by a solid 2.15% to 1,246.04 while the DAX was up by 2.31% to 9,084.30.
Most market analysts attributed the sudden return of risk appetite was attributed to the oil rally, solid European corporate earnings, and skyrocketing Deutsche Bank stocks after the Financial Times reported that Deutsche Bank is “considering buying back several billion euros of its debt” in order to step up “efforts to shore up the tumbling value of its securities.” Some analysts maintain that the risk-taking was just due to bargain-hunting, however.
In any case, U.S. equity futures were glowing green, with the S&P 500 futures up by 1.03% to 1,867.25 and the Nasdaq futures up by 1.43% to 4,000.75 during the forex session. Meanwhile, gold, which is a go-to asset during periods of risk aversion, was down by 1.29% to $1,183.10 per troy ounce during the session.
Major Currency Movers:
EUR – The euro was one of the strongest currencies yesterday, but it had a reversal of fortune during today’s morning London, thanks to the sudden return of risk appetite. If fact, the euro was THE weakest currency during the session since it lost out to all of its forex rivals.
EUR/USD was down by 15 pips (-0.14%) to 1.1265, EUR/GBP was down by 62 pips (-0.80%) to 0.7737, EUR/NZD was down by 76 pips (-0.45%) to 1.6921
GBP – Pound pairs started the session strong, due perhaps to stronger demand for higher-yielding currencies like the pound. Pound pairs then stumbled for a while after the U.K. reported disappointing industrial and manufacturing production in December, but pound pairs quickly found buyers again and resumed climbing higher. Not only that, the pound actually ended up being the one currency to rule them all (during this trading session at least), giving the other higher-yielding currencies a mighty good whupping.
GBP/USD was up by 102 pips (+0.70%) to 1.4563 with 1.4439 as session low, GBP/JPY was up by 131 pips (+0.79%) to 167.46 with 165.84 as session low, GBP/AUD was up by 78 pips (+0.38%) to 2.0498 with 2.0320 as session low
CAD – If oil benchmarks are rallying, then it’s pretty much a given that the Loonie was in demand as well. The Loonie only barely won out against the other comdolls (AUD and NZD), however, since they were in demand as well.
USD/CAD was down by 45 pips (-0.32%) to 1.3841, EUR/CAD was down by 68 pips (-0.43%) to 1.5596, CAD/JPY was up by 32 pips (+0.38%) to 83.03
- 3:00 pm GMT: NIESR U.K. GDP estimate (0.6% previous)
- 3:00 pm GMT: U.S. Fed Chairperson Janet Yellen will testify before the House Financial Services Committee
- 3:30 pm GMT: U.S. crude oil inventories (3.1M expected, 7.8M previous)
- 6:30 pm GMT: San Francisco Fed President John Williams will speak about health and the economy
- 7:00 pm GMT: U.S. federal budget balance ($22.8B expected, -$14.4B previous)
- 9:30 pm GMT: BNZ New Zealand PMI (56.7 previous)
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
Head on to Big Pippin’s Daily Chart Art for some pip-locking technical weeks!