London Session Recap – May 6, 2014

  • European Services PMI data inline: Services PMI inline with 53.1 forecast/previous; Composite PMI inline with 54.0 forecast/previous
  • European Retail Sales m/m: 0.3% vs. -0.2% forecast, 0.1% previous
  • U.K. Services PMI better-than-expected: 58.7 vs. 57.8 forecast, 57.6 previous

Forex traders went to work as soon as the London session began, selling the Greenback across the board. An exact catalyst doesn’t seem to be present, but an argument can be made that U.K. traders coming off of the May Day holiday were just catching up to U.S. Dollar weakness that began to be priced in after Friday’s jobs reports (possibly focusing on the drop in participation rate and lack of wage growth?).

The mostly better-than-expected data today from both the U.K. and Europe may also be a contributing factor, given that positive signs of a recovery tends to be a signal to move out of safe haven assets, like the U.S. Dollar, and into higher-yielding currencies like the comdolls and British Pound.  Overall, it’s not looking good for the Greenback on the session and it seems to be getting weaker:

EUR/USD is up 68 pips (+0.49%) to 1.3940, GBPUSD is up 115 pips (+0.68%) to 1.6977, USD/JPY is down 38 pips (-0.37%) to 101.78, and the biggest drop comes against the Kiwi, NZD/USD is up 89 pips (+1.03%) to .8763

The afternoon London session/morning U.S. session is filled with second tier economic data to add to the welcome increase in volatility.

At 1:30 pm GMT, we’ll get the Canadian Merchandise trade data (0.3B CAD vs. 0.29B CAD previous) and U.S. Trade Balance data (-$40B vs. -$42.3B previous). And at 3:00 pm GMT, it’s the U.S. IBD consumer optimism number (47.9 vs. 48 previous) and Canadian Ivey PMI data (54.5 vs. 55.2 previous) set to come out and potentially move the markets.

Again, this is all second tier data, which means we’d have to see a big deviation from expectations or previous to really set the markets in motion.  If we don’t see any big surprises in the data, it may be all about momentum, which means it could me a pretty bad day for the Greenback.  Stay frosty!

See also:

Asian Session Recap

U.S. Session Recap

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