Article Highlights

  • Swiss trade balance: 3.51B CHF vs. 2.67B CHF expected, 2.59B CHF previous
  • French final HICP m/m: revised lower from -1.0% to -1.1%
  • French final HICP y/y: revised lower from 0.4% to 0.3%
  • Euro Zone current account: €25.5B vs. €22.3B expected, €26.9B previous
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The spotlight was on the pound during today’s morning London forex session, thanks to upbeat comments from British PM Cameron and top EU officials ahead the EU Summit.

Major Events:

Brexit deal in focus – As Forex Gump noted in his Primer and Update on The Brexit Saga, British Prime Minister David Cameron will be meeting with other EU leaders in an EU Summit in Brussels today and tomorrow in order to try and come to terms on a deal that would help convince Britons to vote against a potential Brexit.

Having said that, European Commission President Jean-Claude Juncker was quoted as saying that he was “quite confident” that they would be able to hammer out a deal. Cameron, meanwhile, said that “we are in a good place” when asked if he would be able to pull off a deal. Quite naturally, sentiment on the pound began to improve.

The oil rally continues – No commitment from Iran to join in on the oil output freeze just yet, but Iran was supposedly open to it, according to some media outlets. Also, Iraqi oil minister Adel Abdul Mahdi said earlier that talks between OPEC members and non-OPEC members will continue today.

These two oil updates were apparently the main catalysts for another round of heavy speculation that sent oil prices higher. U.S. crude oil is up by 2.41% to $31.40 per barrel while Brent crude oil was up by 2.16% to $35.24 per barrel during the session.

Another risk-on session – We had another bout of risk-taking during the morning London session, with the pan-European FTSEurofirst 300 up by 0.71% to 1,304.85 and the DAX up by 1.58% to 9,525.70. U.S. equity futures were also in the green, with the S&P 500 futures up by 0.25% to 1,927.50 while the Nasdaq futures was up by 0.41% to 4,214.00 during the session. Meanwhile, gold, which is the traditional safe-haven asset, was down by 0.48% to $1,205.60 per troy ounce.

The persistent appetite for risk was likely due to another round of rising oil prices, although market analysts also pointed to a strong performance from the European tech sector. Interestingly enough, the only major European equity index that was buckling against the sea of green was the U.K. FTSE 100 since it was down by 0.38% to 6,007.50, but it’s now off its session low around 5,979.00. This was likely due to Brexit jitters because of the EU Summit today.

The ECB minutes – The ECB minutes for the January 20-21 huddle was finally released earlier today. The minutes revealed that ECB officials expect “key policy rates to remain at current or lower levels for an extended period of time.” The minutes also revealed that downside risks to economic outlook have increased and that the ECB should be ready to use the “broad range of instruments and tools at its disposal.”

Basically, it was a rehash of all that was said during the ECB press conference after the monetary policy decision was announced. Aside from the vague statement that “key policy rates to remain at current or lower levels for an extended period of time,” there wasn’t really any forward guidance on the future direction of monetary policy, which probably disappointed a few traders.

Major Currency Movers:

GBP – The pound was the king of pips (or queen if you like) during the forex session, thanks to the upbeat comments that I highlighted earlier. The pound very easily steamrolled its forex rivals, but it was particularly super effective against the safe-havens, likely because of the prevailing risk-on sentiment during the session.

GBP/USD was up by 77 pips (+0.54%) to 1.4365, GBP/CHF was up by 112 pips (+0.79%) to 1.4294, GBP/NZD was up by 168 pips (+0.78%) to 2,1665

AUD – The Aussie was easily the second strongest currency during the session, even though the Australian jobs report that was released during the earlier Asian session was less than stellar. There weren’t any apparent catalysts for the Aussie’s strength, but the Aussie was able to trump its fellow comdolls regardless.

AUD/USD was up by 19 pips (+0.26%) to 0.7161, AUD/NZD was up by 51 pips (+0.48%) to 1.0798, AUD/CAD was up by 32 pips (+0.33%) to 0.9801

EUR – If the pound was the king of the mountain, then the lower-yielding euro was definity down in the dumps since it lost out to ALL its forex rivals. The prevailing risk-on sentiment was likely the main culprit for the euro’s weakness, but demand for the pound at the euro’s expense was likely a factor as well since the euro was particularly vulnerable to the pound. Another likely culprit was the the ECB minutes since the euro’s broad-based weakness intensified after that.

EUR/USD was down by 42 pips (-0.38%) to 1.1085, EUR/JPY was down by 59 pips (-0.47%) to 126.18, EUR/GBP was down by 69 pips (-0.88%) to 0.7716

Watch Out For:

  • 1:30 pm GMT: U.S. initial jobless claims (275K expected, 269K previous)
  • 1:30 pm GMT: Canadian wholesale sales (0.2% expected, 1.8% previous)
  • 1:30 pm GMT: Philadelphia Fed manufacturing survey (-3.0 expected, -3.5 previous)
  • 3:00 pm GMT: U.S. CB leading indicator (-0.2% expected, -0.2% previous)
  • 4:00 pm GMT: U.S. crude oil inventories (3.2M expected, -0.8M previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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