Article Highlights

  • No economic reports were released during the session
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The euro continued its recovery after last week’s plunge. Retreating oil prices during the morning London session, meanwhile, apparently put an end to the Loonie’s bullish party.

Major Events/Reports:

Monte dei Paschi rumors – An unnamed Treasury source being cited by Reuters supposedly said the following:

“There is confidence at the economy ministry that Monte dei Paschi’s cash call can succeed. If the operation failed, the state would carry out a precautionary recapitalisation.”

Basically, this unnamed source is saying that the state is ready and willing to step in should Monte dei Paschi’s privately-backed recapitalization plan fails.

For the newbies out there, Italy has an ongoing banking crisis because Italian banks have a lot of bad loans in their books. One such bank, Monte dei Paschi, is required to come up with €5 billion or risk getting wound down. However, the Italian referendum has made it more difficult to attract capital. And should Monte dei Paschi’s recapitalization plan fail, then it may cause a contagion effect in Italy’s banking sector that may then spread to the rest of the Euro Zone.

If you wan’t to know more about the background on this Monte dei Paschi hubbub, you can read more about it in Forex Gump’s write-up here.

Oil benchmarks off their highs – Oil benchmarks are still holding onto their substantial gains after reacting to news over the weekend that non-OPEC members agreed to cut output. However, oil benchmarks spent the morning London session by giving back some of their gains. Aside from profit-taking, market analysts couldn’t pinpoint a reason for the slide in oil prices during the session.

  • U.S. crude oil still up by 4.47% to $53.80 for the day after reaching a high of $54.50 earlier
  • Brent crude oil still up by 4.23% to $56.63 for the day after reaching a high of $57.52 earlier

Skittishness to start the week – The major European equity indices were broadly in the red during the session, hinting at the prevalence of risk aversion.

  • The pan-European FTSEurofirst 300 was down by 0.32% to 1,399.60
  • Germany’s DAX was down by 0.20% to 11,181.50
  • The U.K.’s FTSE 100 was down by 0.36% to 6,929.30

U.S. equity futures were also in the red.

  • S&P 500 futures were down by 0.09% to 2,252.75
  • Nasdaq futures were down by 0.45% to 4,871.13

Aside from profit-taking after last week’s week-long rally, market analysts also point to weakness in pharmaceuticals as one of the reasons for the sour sentiment at the start of the week.

Major Market Movers:

EUR – The euro was the best performing currency of the morning London session. There was no clear catalyst, but the risk-off vibes likely helped keep the euro supported. Another likely reason is the rumor about Monte dei Paschi, since that would ease the threat of a banking crisis in Italy that may spread out to the rest of the Euro Zone.

Some market analysts are also pointing to Greenback weakness, however. Although, short covering is also a possibility after last week’s euro slump in the aftermath of the ECB decision.

EUR/USD was up by 33 pips (+0.31%) to 1.0597, EUR/JPY was up by 32 pips (+0.26%) to 122.69, EUR/CHF was up by 18 pips (+0.17%) to 1.0773

GBP – The pound came in second after the euro, even though there were no catalysts. Some market analysts attributed this to preemptive positioning ahead of this week’s top-tier catalysts for the pound.

GBP/USD was up by 34 pips (+0.27%) to 1.2630, GBP/CHF was up by 18 pips (+0.15%) to 1.2840, GBP/CAD was up by 60 pips (+0.37%) to 1.6592

CAD – Most Loonie pairs are still up for the day. However, the Loonie broadly gave back some of their gains during today’s morning London session. There was no clear reason for the dip, but Loonie pairs were likely tracking the dip in oil prices.

USD/CAD was up by 14 pips (+0.11%) to 1.3138, AUD/CAD was up by 32 pips (+0.33%) to 0.9817, NZD/CAD was up by 23 pips (+0.27%) to 0.9409

Watch Out For:

  • 2:30 pm GMT: CB’s U.K. leading index (0.1% previous)
  • 7:00 pm GMT: U.S. Federal budget (-$130.0B expected, -$44.2B previous)
  • 9:45 pm GMT: New Zealand’s FPI (-0.8% previous)
  • 9:45 pm GMT: New Zealand’s manufacturing sales (2.2% previous)

See also:

Asian Session Recap

Last Week’s Top Forex Movers

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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