London Session Recap – February 27, 2014

  • Swiss GDP weaker-than-expected: 1.7% vs. 2.0% y/y forecast, 0.2% vs. 0.4% m/m forecast
  • German Import Price Index m/m better-than-expected but weak: -0.1% vs. -0.2% forecast
  • German Unemployment rate inline with forecasts and previous at 6.8%; Unemployment Change better at -14K vs. -10K forecast
  • European Economic Sentiment ticks higher: 101.2 vs. 100.7 forecast/101.0 previous
  • Risk aversion behavior rises on rising tensions in the Ukraine

The forex market is starting to kick for the first time this week thanks to catalysts from all different angles.

The big mover for the morning London session is the Japanese yen, benefiting from the rising tensions in the Ukraine.  As reported by Bloomberg this morning, Russian President Vladimir Putin orders military drills and fighter jets on combat alert on risking tensions in the Ukraine.  As a response, the Ukraine government issues a warning to Russia that any incursion into their territory would be considered an act of aggression.

During times of geopolitical distress, risk aversion behavior rises, usually benefitting the Japanese yen the most as currency traders get out of higher-yielding assets to go back to “safe havens.” USD/JPY is down 49 pips (-0.47%) to 101.85, EUR/JPY is down 92 pips (-0.66%) to 139.08, and AUD/JPY is currently down 70 pips (-0.77%) to 91.01.

We’re also seeing strong interest in the New Zealand dollar, sparked by today’s positive trade balance number early in the Asia session. Even with risk aversion rising, the Kiwi dollar is still mostly up on the session: NZD/USD is up 47 pips (+0.56%) to .8358, NZD/JPY is up 11 pips (+0.10%) to 85.11, and AUD/NZD is currently down 88 pips (-0.38%) to 1.0687.

Coming up for the rest of the Thursday session, we’ve got a few European, Canada and U.S. data points and the rescheduled testimony to the U.S. Senate Banking Committee by Fed Chair Janet Yellen.

At 1:00 pm GMT, we’ve got German HICP (Prelim) data to give us a fresh look at inflation in one of Europe’s bigger economies. Expectations are for a 0.7% vs. -0.7% previous read on the monthly number.

At 1:30 pm GMT, Canada will release its current account data, forecasted to come in at -17B CAD vs. -15.5B CAD previous.  This could fuel more loonie selling in the short-term if the actual comes inline or worse than expectations.

And at the same time as Canadian data, the U.S. will release its Durable Goods  and Initial Claims numbers.  The headline durable goods number is expected to be weak once again, but better than the previous read: -1.7% vs. -4.2% previous.  Initial claims are expected to come in at 335K vs. 336K previous.

Finally, Fed Chair Janet Yellen is set to testify to the Senate Banking Committee at 3:00 pm GMT, which was rescheduled due to the extreme weather conditions in the U.S. Traders aren’t expecting any new insights to monetary policy since her last testimony to Congress two weeks ago, but this is an event to be aware of in case we do see a change. Be prepared and stay frosty traders!

See also:

Asian Session Recap

U.S. Session Recap

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