London Session Recap – May 14, 2014

  • German CPI (Final) inline with forecast and previous at -0.2%
  • French CPI ticks higher: 0.7% vs. 0.6% previous
  • U.K. Claimant Count Rate: 3.3% vs. 3.3% forecast, 3.4% previous; Net Change lower: -25.1K vs. -30K forecast, -30.6K previous
  • European Industrial Production m/m inline with forecast at -0.3%, below 0.2% previous
  • From inflation report, Bank of England still sees slack in the economy

There was currency movement everywhere, but the biggest moves of the day came from Sterling thanks to U.K. unemployment data and the BOE inflation report.

Forex traders focused on the net change in claims ticking higher, showing that a rise unemployment applications and we also saw data that wages were growing slower than expected (1.7% vs. 2.1% forecast); the reaction was bearish in Sterling.  An hour later, the Bank of England presented its inflation report, which also sparked a bearish reaction in the Pound.

A couple of key takeaways that forex traders may have focused on are comments that there remains slack in the economy, and that persistent currency strength could affect the rate of the U.K.’s expansion. Both points suggest that rate hikes will happen later rather than sooner, pushing Sterling lower against the majors on the session:

GBP/USD is down 53 pips (-0.32%) to 1.6770, GBP/JPY is down 117 pips (-0.68%) to 170.84, and EUR/GBP is up 31 pips (+0.39%) to .8175

The other mover from the majors currencies is the Japanese Yen, rallying on the day after a big upside surprise in inflation data (4.1% vs. 1.7% previous) from the Asia session.  Traders reacted by reducing Yen shorts as this data decreases the speculation  that we’ll see further stimulus by the Bank of Japan.

USD/JPY is down 40 pips (-0.40%) to 101.83, EUR/JPY is down 47 pips (-0.33%) to 139.62, and CHFJPY is down 40 pips (-0.35%) to 114.44

The afternoon London session/morning U.S. session is light on economic data with only U.S. producer price index in the line up.  Expectations are for a tick lower in both the headline and core number, but we’ll find out for sure at 1:30 pm GMT. If we see a dip lower like we did in CPI, it could negative for the Greenback for the session.

And right after the U.S. session close, we’ll get New Zealand data in the form of BNZ Business NZ PMI at 11:30 pm GMT.  It’s not a major economic event, but one that can spark volatility for the Kiwi, which has been in focus thanks to recent rate hikes by the RBNZ.  Stay frosty!

See also:

Asian Session Recap

U.S. Session Recap

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