London Session Forex Recap – May 18, 2016

Trading conditions were relatively subdued during the morning London session, probably because forex traders were sitting on their hands while waiting for the FOMC meeting minutes to be released. The pound was clearly on the move, though.

Major Events/Reports:

Positive U.K. jobs report – The United Kingdom’s jobs report for the three months to March was pretty positive overall since the jobless rate held steady at 5.1% as expected while the number of people claiming unemployment benefits decreased by 2.4K, which is great because a 4.5K increase was expected. The previous reading was revised higher to 14.7K from 6.7K, though, which is a real bummer.

Still, wages grew by 2.0%, which is faster than the expected 1.7% increase and the previous 1.9% increase. The faster wage growth was due to higher bonuses, though, since wages that have been stripped of bonuses only grew by 2.1%, which is a bit slower than the previous reporting period’s 2.2% growth.

New Brexit poll results – The latest Brexit-related poll conducted by the Evening Standard newspaper and Ipsos Mori showed that the anti-Brexit camp had a commanding 18 percentage points lead over the pro-Brexit camp. If you still don’t know what’s the big deal with this Brexit thing for some reason, then check out Forex Gump’s Brexit Primer and Brexit referendum update.

Commodities bleed out – Commodities were beating a hasty retreat pretty much across the board during the morning London session. The base metal copper was down by 1.34% to $2.061 per pound while the precious metal gold was down by 0.27% to $1,273.50 per troy ounce near the end of the session. Oil benchmarks were also now printing losses after gaining earlier, with U.S. crude oil down by 0.06% to $48.28 per barrel and Brent crude oil down by 0.43% to $49.07 per barrel.

Market analysts blamed the broad-based commodities weakness to the Greenback’s recent strength due to renewed rate hike expectations. Although some market analysts also pointed out that oversupply jitters were weighing down on oil prices again.

Risk aversion persists – Risk aversion was the dominant sentiment during the morning London session, with the pan-European FTSEurofirst 300 down by 0.21% to 1,312.20, the Euro Stoxx 50 down by 0.11% to 2,929.50, and the DAX down by 0.23% to 9,867.50 near the end of the session. U.S. equity futures also dipped into the red, with the S&P 500 futures down by 0.13% to 2,040.75 and Nasdaq futures down by 0.12% to 4,314.25.

The overall downbeat mood was attributed by most market analysts to the renewed rate hike expectations, with the upcoming FOMC meeting minutes in focus.

Major Currency Movers:

GBP – The pound started the session on a weak footing but got a bullish boost when the upbeat jobs report was released. The pound bulls were quickly overwhelmed by the bears, however, and the pound then began to grind lower across the board.

Strangely enough, pound pairs received another injection of bullish volatility that allowed them to spike higher while chewing through the sell order of the bears as if they were nothing. There was no clear catalyst for the second round of bullish volatility, but most market analysts are pointing their fingers to the Brexit poll that I mentioned earlier.

GBP/USD was up by 133 pips (+0.93%) to 1.4543, GBP/CAD was up by 151 pips (+0.80%) to 1.8858, GBP/JPY was up by 101 pips (+0.64%) to 159.05

Watch Out For:

• 12:30 pm GMT: Canadian foreign security purchases ($10.35B expected, $15.94B previous)
• 1:30 pm GMT: U.K. CB leading index (0.2% previous)
• 2:30 pm GMT: U.S. crude oil inventories (-3.1m expected, -3.4M previous)
• 6:00 pm GMT: U.S. FOMC meeting minutes to be released
• 7:00 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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