London Session Recap – June 5, 2014

  • German Factory Orders: 3.1% vs. 1.4% forecast, -2.8% previous
  • U.K. Halifax House Price Index spikes higher: 3.9% vs. 0.7% forecast, -0.2% previous
  • European Retail Trade m/m positive:  0.4% vs. 0.1% previous
  • Bank of England’s Monetary Policy Committee makes no changes at today’s meeting; Rates stay at 0.5% and no change to 375B GBP bond purchasing program
  • European Central Bank cuts rates to 0.15% from 0.25%; press conference scheduled at 1:30 pm GMT

As usual, volatility was tight ahead of monetary policy decisions from both the U.K. and Europe, but action picked up big time as we saw the ECB cut the main refinancing rate to 0.15%.  They also dropped the deposit rate to -0.10% and the marginal lending facility rate from 0.75% to 0.40%, all of which will go into effect June 11.

The reaction was fierce as we saw an initial spike up in the euro, only to be faded seemingly at an instant.  It looks like all major currencies are feeling the effect of today’s decisions: EUR/USD broke below the 1.3600 handle, EUR/JPY is down (-0.35%) to test the 139.00 area, and EUR/GBP is down (-0.31%) to test the .8100 area.

The real fireworks may kick off in the afternoon London trading session at 1:30 pm GMT.  First, we’ve got a couple of economic data points to be released at that time in the form of U.S. initial claims (310K forecast vs. 300K previous) and Canadian Building Permits (4.2% forecast vs. -3.0% previous) data. Both are second tier events that do have the ability to cause a short-term spike in volatility if we get reads far off from forecast or previous.

But the big event of the hour that may overshadow economic data releases, and event the rate announcement, is the ECB monetary press conference.  This event tends to cause big volatility across all currencies, and this time shouldn’t be different given the fresh changes in European monetary policy today.

And to round out the London session, we’ll get the Ivey PMI read at 3:00 pm GMT.  This event does often move the Loonie around intraday, so if you’re Canadian Dollar trader be aware that expectations are for a 56 read vs. 54.1 previous.

See also:

Asia Session Recap

U.S. Session Recap

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