London Session Recap – January 14, 2014

  • Japanese yen takes a broad hit thanks to weak current account deficit
  • New Zealand dollar finds strength in Europe after positive NZIER Business Confidence index: 52 vs. 38 previous
  • European industrial production m/m improved: 1.8% vs. -0.8% previous
  • U.K. inflation data comes in lower-than-expected with headline y/y down to 2.0% vs. 2.1% forecast
  • U.S. Retail Sales m/m better-than-expected: 0.2% vs. 0.7% forecast

Quite a busy morning for currencies, most notably the Japanese yen as European traders sold it off from the start of the London trading session. This was due to the Japanese current account deficit coming in much higher-than-expected (592.8B yen shortcoming), and increasing expectations that Japanese capital will continue to flow out elsewhere, like U.S. bonds. USD/JPY has move up about 30 pips since the session open, and currently consolidating around 103.60.

The other major mover is the New Zealand dollar which seems to have found a strong bid across the board in Europe thanks to the better-than-previous read of the NZIER Business Confidence index.  The Kiwi is up almost 80 pips against its close trading partner, Australia, and up nearly 60 pips against the euro on today’s session.

The last bit of major news from the morning London session is the U.K. CPI report, which showed the y/y read finally declined enough to hit the Bank of England’s 2% threshold in December.  A decline in pricing pressures probably means that the purchasing power of U.K. consumers will not decline, which should support the economy.  This could provide bullish support for Sterling in the short-term, which found strength against the euro early in the session, but has since retraced back to around .8327.

For the rest of the session, we U.S. Business Inventories data to potentially drive U.S. dollar sentiment; expectations are for a slight decline 0.3% forecast vs. 0.7% previous.  We also have speeches from Fed members Plosser and Fisher; these speeches are not usually a market mover, but it’s a good idea to keep an ear out for hints of where U.S. monetary policy may go in case there is a change.

See also:

Asian Session Recap

U.S. Session Recap

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