London Session Recap – May 22, 2014

  • European Flash PMI data mostly weaker: French Flash Manufacturing PMI at 49.3 vs. 51.0 forecast, 51.2 previous; German Flash Manufacturing PMI at 52.9 vs. 54 forecast, 54.1 previous
  • U.K. GDP (2nd Est.) q/q inline with forecast and previous read of 0.8%
  • U.K. Public Borrowing (PSNB ex interventions):  7.4B GBPvs. 4.8B GBP forecast, 6.7B GBP previous

We had mostly weak European Flash PMI’s and inline U.K. GDP data to spark some much needed forex volatility into the morning London session.  And we’re also seeing the after affects of the positive surprise in Chinese manufacturing PMI fading.

The broad European Flash PMI data came in mostly weaker with the only shining beacons of hope coming from German Flash Services PMI (56.4 vs. 54.5 forecast, 54.7).  Weak data of course adds fuel to rate cut speculation by the ECB, which is why we saw euro weakness after the data was released.  But the volatility wasn’t much to write home about and the selloff was quickly faded; the euro is basically trading around the Thursday open levels:

EUR/USD is down 14 pips (-0.11%) to 1.3670, EUR/JPY is up 20 pips (+0.14%) to 138.88, and EUR/GBP is up 8 pips (+0.10%) to .8102

The British Pound also got a jolt of action thanks to the second reading of first quarter GDP.  From the London open, it was a run higher in Sterling into the event but the bulls were out of luck as the market dropped on the data release, pushing the Pound broadly lower on the session.

GBP/USD is up 25 pips (-0.15%) to 1.6868, GBP/JPY is up 8 pips (+0.05%) to 171.37, and GBP/CHF is down 20 pips (-0.14%) to 1.5070

Finally, the Japanese Yen was in sell mode after the positive Chinese manufacturing PMI data during the Asia session had forex traders in risk taking mode.  But the sentiment is slowly being faded as we speak; since hitting session highs at around 101.75, USD/JPY has pulled back to 101.58, still up +0.23% on the day.

The afternoon London/morning U.S. session calendar has a healthy mix of U.S. and Canadian data to hopefully kick volatility into gear to give currency traders more opportunities.

At 1:30 pm GMT is when we’ll see a trio of economic data points from both countries, with the most notable being the Canadian retail sales data. The expectation is for the headline and core number to come in below the previous reads, and since retail sales data does tend to be a market mover, it’s definitely an event to watch for Loonie traders.

And to close out the London trading session, we’ll see U.S. flash manufacturing PMI at 2:45 pm GMT and U.S. existing home sales at 3:00 pm GMT.  The existing home sales number has the bigger potential to move markets as housing remains a big component of the U.S. economy, so if the actual number comes in below the 4.69M forecast, expected a bit of risk aversion and/or Greenback weakness. Stay frosty!

See also:

Asian Session Recap

U.S. Session Recap

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