Article Highlights

  • Swiss jobless rate: 3.7% vs. 3.8% expected and previous
  • German industrial production m/m: 3.3% vs. 0.5% expected, -0.3% previous
  • German industrial production y/y: 2.2% vs. -1.6% expected, -1.3% previous
  • French trade balance: -€3.71B vs. -€4.10B expected, -€3.68B previous
  • French current account: -€1.4B vs. -€0.4B previous
  • Swiss CPI m/m: 0.2% vs. -0.1% expected, -0.4% previous
  • Swiss CPI y/y: -0.8% vs. -1.1% expected, -1.3% previous
  • Euro zone final Q4 2015 GDP q/q: unrevised at 0.3% as expected
  • Euro zone final Q4 2015 GDP y/y: 1.6% vs. unrevised at 1.5% expected
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The forex calendar for today’s morning London forex session was full, but currency traders turned mainly to commodities and overall market sentiment for direction.

Major Events:

Commodities crumble – Commodities, especially base metals, were routed during today’s morning London session, with  copper down by 1.20% to $2.256 per pound. Souring sentiment for base metals like copper and aluminum can be traced to China’s rather disappointing  trade data from earlier.

Oil takes a round trip tour – Oil benchmarks had a roller coaster ride during the morning London session, with U.S. crude oil finishing 0.84% higher to $38.22 per barrel after dipping to $37.36 earlier. The same can be said for Brent crude oil, which ended the session 1.20% higher to $41.33 per barrel after taking a trip to $41.28 earlier.

The initial slump in oil prices was due to Kuwaiti Oil Minister Anas al-Saleh’s rather pessimistic statement, according to market analysts. Specifically, the oil minister said that “I’ll go full power if there’s no agreement. Every barrel I produce I’ll sell,” referring to the deal to freeze oil production at January levels on the condition that other oil producers do so. As for the return trip, there was no clear catalyst for that just yet.

Iron ore jumps (again) – The broad-based commodities retreat didn’t seem to affect iron ore since it chalked up another 5.9% rise to $65 per dry metric ton after yesterday’s head-turning 19% jump. Market analysts offered various reasons for the continuing rise from shorts getting squeezed out to seasonal restocking and/or higher demand from Chinese steel mills.

Downbeat sentiment persists – Looks like risk aversion is the dominant sentiment for today’s morning London session since the pan-European FTSEurofirst 300 was down by a stinging 1.13% to 1,326.20 while the DAX was down by a painful 1.22% to 9,659.80 during the session.

U.S. equity futures were also warning that risk aversion is gonna spill over into the upcoming U.S. session, with the S&P 500 futures down by 0.59% to 1,987.25 and the Nasdaq futures down by 0.76% to 4,267.50. Safe-haven flows to gold also drove the shiny stuff up by 1.14% to $1,278.40 per troy ounce despite retreating commodity prices.

The risk-off sentiment during the morning London session was likely due to retreating commodity prices since mining stocks were the main losers dragging down equity indices.

BOE Carney speaks – BOE Guv’nah Mark Carney testified before the Parliamentary Committee on the economic and financial costs of the United Kingdom’s membership in the E.U., as well as the possible consequences of a Brexit.

And while Carney avoided taking sides on the Brexit issue, he did say that “There could be lower levels of activity because of the degree of uncertainty that could affect investment and household spending.” In short, a Brexit could negatively impact the British economy in the short-term. Carney also said that a Brexit would cause banks to relocate from “without question” if mutual recognition agreements aren’t quickly reestablished.

Major Currency Movers:

AUD – The higher-yielding Aussie had a repeat performance as the one currency to rule them all despite the risk-off environment. Like yesterday’s morning London forex session, we can probably thank the iron ore rally for the Aussie’s continuing strength.

AUD/USD was up by 33 pips (+0.45%) to 0.7455, AUD/CHF was up by 42 pips (+0.57%) to 0.7407, AUD/NZD was up by 49 pips (+0.45%) to 1.1016

CAD – The Loonie’s forex price action was tracking that of oil’s, so the Loonie dipped at the start of the morning London session before finally clawing its way back up.

USD/CAD was down by 4 pips (-0.04%) to 1.3322 with 1.3358 as session high, CAD/JPY was up by 7 pips (+0.08%) to 84.80 with 84.49 as session low, CAD/CHF was up by 10 pips (+0.14%) to 0.7455 with 0.7425 as session low

GBP – The prevailing risk-off sentiment and renewed Brexit jitters over BOE Carney’s testimony pulled the pound lower across the board, making it the weakest currency during the morning London forex session.

GBP/USD was down by 48 pips (-0.34%) to 1.4204, GBP/JPY was down by 46 pips (-0.29%) to 160.49, GBP/AUD was down by 151 pips (-0.79%) to 1.9049

Watch Out For:

  • 1:15 pm GMT: Canadian housing starts (181K expected, 166K previous)
  • 1:30 pm GMT: Canadian building permits (-2.2% expected, 11.3% previous)
  • 5:00 pm GMT: BOE MPC Member Martin Weale has a speech

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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