London Session Recap – July 3, 2014

  • French Services PMI inline with forecast/previous at 48.2
  • German Services PMI lower at 54.6 vs. 54.8 forecast/previous
  • European Composite and Services PMI both inline with 52.8 forecast/previous
  • U.K. Services PMI:  57.7 vs. 58.3 forecast, 58.6 previous
  • European Retail Trade:  0.0% vs. 0.3% forecast, 0.4% previous

First, we got a batch of Services PMI data from Europe coming in mixed, but most notably we saw weaker-than-expected reads from Germany and the U.K. The reaction in the euro was mostly choppiness in euro pairs, but the reaction in Sterling was solidly negative.  The reaction is not surprising given the strong string of economic data from the U.K., so we may be seeing some of the recent Pound euphoria taken off of the table.  The British Pound is taking a small hit, putting it mostly down on the session:

GBP/USD is down 31 pips (-0.18%) to 1.7133, GBP/JPY is down only 6 pips (-0.03%) to 174.57, and GBP/CAD is down 61 pips (-0.33%) to 1.8239

I should also mention that the Canadian Dollar caught a strong bid during the morning London session.  There doesn’t seem to be a direct catalyst, but a possible reason could be the recent positive data and its strong correlation with U.S. strength could be leading into a strong trade balance read later in the session.  The Loonie bulls are very much still in control on the session:

USD/CAD is down 17 pips (-0.17%) to 1.0644, EUR/CAD is down 32 pips (-0.22%) to 1.4531, and the big mover on the session is AUD/CAD, down 87 pips (-0.87%) to .9979

Because of the U.S. bank holiday on Friday, we’ll get a ton of tier one events for the Thursday afternoon London and U.S. trading session.

The fireworks may begin at 12:45 pm GMT, when we get the latest decision on monetary policy from the European Central Bank.  The expectations from the ECB is to keep short-term rates at the 0.15% level established in June and no new quantitative easing measures.  If that’s what we get, then euro traders will most likely wait until the ECB press conference at 1:30 pm GMT for Draghi’s comments before taking any action.

And to make things just a little bit trickier for forex traders, at 1:30 pm GMT we’ll also get tier one reports from both the U.S. and Canada, most notably the big daddy of all monthly economic data points: the U.S. Jobs report. (Check out our Forex Trading Guide for NFP)

With the market expecting the net change and unemployment rate to come inline with previous reads, this may be a non-event, but watch out if it isn’t because the reaction to NFP tends to be very, very quick!  At the same time, we’ll get the monthly U.S. and Canadian Trade Balance numbers, both expected to be negative but better-than-previous reads.

Since all of these economic data points and the ECB press conference do not usually come out together, the reaction in the currency markets is highly uncertain; only those with strong risk management skills and nerves of steel should be in the water during this hour.

And to finish out the London session, we’ll get the ISM Non-Manufacturing number at 3:00 pm GMT.  This is also a tier one event, but the expectations are for a read inline with previous at 56.3.  It could be a non-event but it’s best to stay on your toes on what could be a wild session.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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