Article Highlights

  • Italian trade balance: €6.02B vs. €3.87B expected, €4.40B previous
  • U.K. CPI y/y: 0.3% as expected vs. 0.2% previous
  • U.K. core CPI y/y: 1.2% vs. 1.3% expected, 1.4% previous
  • U.K. PPI input m/m: -0.7% vs. -1.2% expected, -0.3% previous
  • U.K. RPI y/y: 1.3% vs. 1.4% expected, 1.2% previous
  • U.K. HPI y/y: 6.7% vs. 7.9% expected, 7.7% previous
  • German ZEW economic sentiment: 1.0 vs. 3.2 expected, 10.2 previous
  • German ZEW current conditions: 52.3 vs. 55.0 expected, 59.7 previous
  • Euro Zone ZEW economic sentiment: 13.6 vs. 10.3 expected, 22.7 previous
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Returning risk aversion during today’s morning London forex session meant a reversal of fortune for the safe-havens and the comdolls. The pound, meanwhile, was marching to the beat of a different drummer.

Major Events:

U.K. headline CPI within expectations – The United Kingdom’s headline CPI reading for the January period ticked higher from 0.2% to 0.3% as expected. According to the CPI report, the main drags came from lower transport costs and cheaper prices for food and non-alcoholic beverages. The main drivers, meanwhile, came from more expensive education costs and higher prices for other goods and services, namely restaurants and hotels.

Oil producers agree to freeze output, but oil retreats – Russia, Saudi Arabia, Qatar, and Venezuela sat down in Doha to reason together before coming to an agreement that they would maintain crude oil production at January levels on the condition that other oil producers follow their example. And while there are rumors flying about, Iran and Iraq haven’t  stepped up to officially announce their commitment at the moment, which is probably one of the reasons why oil benchmarks began tumbling after the deal was announced.

U.S. crude oil is still up by 1.17% to $29.79 per barrel after reaching a high of $31.45 per barrel earlier. Brent crude oil, meanwhile, is still up by 1.92% to $34.03 per barrel after getting as high as $35.54 per barrel before the deal was announced.

Risk aversion returns – Retreating oil prices and renewed concern over banks were the main joy killers that allowed risk aversion to make a comeback, according to market analysts.

The pan-European FTSEurofirst 300 was pushed 0.32% lower to 1,263.57 while the DAX dropped by 0.74% to 9,141.00 during the forex session. Both equity indices were in the green earlier. Gold, the traditional safe-haven asset, was also getting buyers. It’s still down by 2.03% to $1,214.30 per troy ounce during the session, but it’s now some distance away  from its low around $1,191.60 per troy ounce.

Major Currency Movers:

GBP – Pound pairs started the forex session on a broadly strong footing before broadly doing an about-face when the headline CPI reading came in within consensus. The pound’s roller coaster price action was likely a case of “buy the rumor, sell the news” with forex traders loading up on the pound ahead of the CPI report, and then dumping the pound when the report finally came out.

GBP/USD was down by 28 pips (-0.20%) to 1.4414 with 1.4515 as session high, GBP/JPY was down by 127 pips (-0.77%) to 164.07 with 166.08 as session high, GBP/NZD was down by 66 pips (-0.31%) to 2.1820 with 2.1997 as session high

CAD – Retreating oil prices and the prevailing risk-off sentiment was a double whammy for the Loonie, making it THE weakest currency during the session. It even lost out to its fellow comdolls and the pound.

USD/CAD was up by 46 pips (+0.33%) to 1.3783, AUD/CAD was up by 21 pips (+0.22%) to 0.9875, CAD/JPY was down by 77 pips (-0.93%) to 82.54

JPY – The returning risk aversion naturally meant higher demand for the safe-haven currencies. And it looks like the Japanese yen was the go-to safe-haven of choice for most forex traders since the yen was able to give its fellow safe-havens the boot.

USD/JPY was down by 66 pips (-0.58%) to 113.82, EUR/JPY was down by 61 pips (-0.46%) to 127.10, CHF/JPY was down by 59 pips (-0.51%) to 115.32

Watch Out For:

  • 1:30 pm GMT: Canadian manufacturing sales (0.8% expected, 1.0% previous)
  • 1:30 pm GMT: U.S. Empire State survey (-10.5 expected, -19.4 previous)
  • 3:00 pm GMT: U.S. NAHB builders survey (unchanged at 60 expected)
  • Dairy auction currently underway; auction usually ends at around 2:00 pm GMT

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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