Article Highlights

  • German final GDP q/q: unrevised at 0.3% as expected
  • German final GDP y/y: unrevised at 2.1% as expected
  • French INSEE manufacturing confidence: 103 vs. 102 expected, 103 previous
  • German IFO business climate: 105.7 vs. 106.8 expected, 107.3 previous
  • German IFO current conditions: 112.9 vs. 112.0 expected, 112.5 previous
  • German IFO expectations: 98.8 vs. 101.6 expected, 102.4 previous
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Most currency pairs were trading sideways during today’s morning London forex session. The only real movers were euro pairs, and they were broadly moving down.

Major Events:

Risk aversion persists – Risk aversion from the earlier session spilled-over into the morning London trading session. The Dax was kicked 0.72% lower to 9,505.00 while the pan-European FTSEurofirst 300 tumbled 0.35% lower to 1,301.77.

U.S. equity futures were also printing losses after being in the green earlier, with the S&P 500 futures down by 0.14% to 1,933.50 and the Nasdaq futures down by 0.17% to 4,207.50 during the morning London session. As for gold, the traditional safe-haven asset, it was pushed 0.48% higher to $1,215.90 per troy ounce during the trading session.

Aside from the spill-over from the earlier session, market analysts also pointed to falling commodities and disappointment over the poor performance of particular companies, namely Standard Chartered and BHP Billiton.

BOE inflation report testimonies – BOE Guv’nah Mark Carney and friends were grilled before the British parliament earlier and Reuters made a nifty list of the highlights during the Q&A session, which you can read here.

Anyhow, when the BOE members were asked about the potential Brexit, they said that contingency plans were being developed, but they refrained from weighing-in on the likely outcome as well as the possible outcomes, with Carney saying that “”We’re not making a judgement about the potential outcome of the referendum, in other words which side will win, or an assessment of the potential consequences of a leave vote.”

Carney also said that more stimulus is not needed, but that the BOE still has some options left in its bad of tricks, saying that they “could cut interest rates towards zero” or “engage in additional asset purchases.” However, when asked if negative rates are in the cards, Carney quickly replied that the BOE has “absolutely no intention, no interest in doing that.”

Overall, the testimonies presented were rather neutral, which is probably why it didn’t affect pound pairs much (for now at least).

Disappointing IFO institute readings The IFO institute reported that Germany’s business climate index sharply dropped from 107.3 to 105.7. This marks the third consecutive month that business confidence has dropped in Germany, the euro zone’s primary economic powerhouse. In addition, the business expectations index dropped from 102.4 to 98.8, which is the first pessimistic reading in six months. On a slightly upbeat note, the current conditions index showed a very slight improvement from 112.5 t 112.9.

According to the report, the business expectations in the manufacturing sector “declined steeply, marking their largest downswing since November 2008.” Moreover, the business climate index for all sectors were either retreating or stagnant, with the construction sector being the sole exception.

Major Currency Movers:

EUR – Euro pairs started the morning London forex session a bit mixed winning out a bit against the higher-yielders while feeling some pressure from the safe-havens. This was likely due to the risk aversion during the morning London session. However, the euro quickly began grinding lower across the board after the IFO institute released its survey results for business sentiment in Germany. Aside from the IFO institute’s survey results, there weren’t really any other apparent catalysts for the euro’s weakness.

EUR/USD was down by 39 pips (-0.35%) to 1.0997, EUR/JPY was down by 54 pips (-0.43%) to 123.23, EUR/AUD was down by 41 pips (-0.38%) to 1.0930

Watch Out For:

  • 2:00 pm GMT: S&P Case-Shiller U.S. HPI (5.80% expected, 5.83% previous)
  • 3:00 pm GMT: U.S. existing home sales (5.34M expected, 5.46M previous)
  • 3:00 pm GMT: U.S. consumer confidence (97.3 expected, 98.1 previous)
  • 3:00 pm GMT: Richmond manufacturing index (2 expected, 2 previous)
  • 5:00 pm GMT: BOE Chief Economist Andy Haldane will deliver a speech

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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