London Session Forex Recap – Sept. 27, 2016

Article Highlights

German import prices m/m: -0.2% vs. -0.1% expected, 0.1% previous
German import prices y/y: -2.6% vs. -2.5% expected, -3.8% previous
Euro Zone private loans y/y: 1.8% vs. 1.9% expected, 1.8% previous
U.K. CBI realized sales: -8 vs. 8 expected, 9 previous

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Europe got swamped by another wave of risk aversion during today’s morning London session, so the safe-haven yen was in demand yet again. Meanwhile, reports about Iran’s refusal to join an oil deal weighed down on oil, and hence, the Loonie.

Major Events/Reports:

Risk-off vibes persists in Europe – Europe showed signs of optimism at the start. Unfortunately, another wave of risk aversion slowly ebbed through the European markets, so equity indices sank further into the red yet again. The risk-off mood was not as intense compared to yesterday, though.

The pan-European FTSEurofirst 300 was down by 0.42% to 1,332.61
The blue-chip Euro Stoxx 50 was down by 0.50% to 2,961.00
The U.K.’s FTSE 100 was down 0.22% to 6,803.00
The DAX was down by 0.82% to 10,310.00

The risk-off mood apparently weighed on U.S. equity futures as well, since they were off their session highs. They were able to end the session in the green, though.

S&P 500 futures were up by 0.18% to 2,143.50 with 2154.00 as session high
Nasdaq futures were up by 0.16% to 4,822.50 with 4,846.00 as session high

The early signs of risk appetite was due to risk sentiment spillover after the U.S. presidential debates, market analysts said. However, market analysts also said that persistent jitters over Deutsche Bank ultimately proved to be a stronger driver for sentiment in Europe.

Again, for those who don’t know, the U.S. Department of Justice has recently demanded that Deutsche Bank should pay a whopping $14 billion fine to settle allegations that the bank improperly sold mortgage-backed securities.

No (oil) deal – Word from Algeria is that Iran doesn’t want to engage in an oil freeze deal with Saudi Arabia, or with any of the other OPEC members for that matter. Bijan Namdar Zanganeh, Iran’s oil minister, was quoted as saying that “It’s not our agenda to reach [an oil freeze] agreement in these two days.” He was also quoted as saying that “We are here for the IEF and to have a consultative informal meeting in OPEC to exchange views. Not more.”

Iran’s adamant refusal to join an oil freeze deal and plans to raise its oil output to 4 million barrels per day didn’t sit well with the market. And so oil benchmarks tanked. Get it? Tanked and oil tankers? Yeah, that was a rather silly pun attempt.

U.S. WTI crude oil tanked by 1.92% to $45.05 per barrel
Brent blend crude oil tanked by 2.07% to $46.94 per barrel

Major Market Movers:

JPY – Today’s morning London session saw another round of risk aversion, so the yen stood triumphant yet again. The other safe-havens (USD and CHF) were also well-supported, though.

USD/JPY was down by 50 pips (-0.50%) to 100.30, CHF/JPY was down by 43 pips (-0.42%) to 103.46, CAD/JPY was down by 71 pips (-0.93%) to 75.81

AUD – The higher-yielding Aussie got a smack-down from most of its peers, thanks to the risk-off vibes. The higher-yielding Kiwi was under pressure as well, but the Kiwi won out against the Aussie since AUD/NZD was down by 16 pips (-0.16%) to 1.0496.

AUD/USD was down by 21 pips (-0.26%) to 0.7658, AUD/JPY was down by 59 pips (-0.78%) to 76.81, AUD/CHF was down by 25 pips (-0.34%) to 0.7438

CAD – The Loonie was THE weakest currency of the morning London session. And we can probably thank the tanking oil prices for that.

USD/CAD was up by 56 pips (+0.43%) to 1.3226, EUR/CAD was up by 49 pips (+0.27%) to 1.4849, NZD/CAD was up by 33 pips (+0.34%) to 0.9650

GBP – There was some rather weird two-way action on the pound. Initially, the pound was the second-weakest currency after the Loonie. However, the pound got a bullish infusion across the board when the morning London session was about to end. There was no apparent catalyst for the sudden demand for the pound, though.

Well, whatever the catalyst for the sudden bullishness on the pound was, it was enough to kick the pound from the second-weakest currency of the session to the second-strongest.

GBP/USD was up by 8 pips (+0.07%) to 1.2987 with 1.2936 as session low, GBP/AUD was up by 55 pips (+0.33%) to 1.6958 with 1.6871 as session low, GBP/CHF was down by 5 pips (-0.04%) to 1.2587 with 1.2531 as session low

Watch Out For:

1:00 pm GMT: U.S. S&P/CS HPI (5.10% expected, 5.13% previous)
1:45 pm GMT: Markit’s flash services PMI (51.1 expected, 51.0 previous)
2:00 pm GMT: U.S. CB consumer confidence (98.8 expected, 101.1 previous)
2:00 pm GMT: Richmond manufacturing index (-2 expected, -11 previous)
3:15 pm GMT: U.S. Fed Governor Stanley Fischer has a speech