London Session Recap – July 16, 2014

  • U.K. unemployment data mostly positive
  • Claimant Count Change to -36.3K vs. -27K forecast, -32.8K previous
  • ILO Unemployment Rate improves slightly as forecasted to 6.5% vs. 6.6% previous
  • European Trade Balance inline with previous at 15.4B EUR, but below 16.5B EUR forecast
  • Credit Suisse ZEW Survey much lower at 0.1 vs. 4.8 previous

Euro traders are in sell mode at the London open as sentiment continues to be weak on Europe’s economic outlook, dovish ECB commentary, and possibly on a report that it’s losing some appeal as a global forex reserve.  Whatever the direct catalysts may be, the euro is taking a solid hit across the board with EUR/USD down 35 pips (-0.26%) on the session and within striking distance of testing the 1.3500 handle (June lows).

The British pound was also on the move thanks to its monthly unemployment data, which came in mostly better-than-expected.  The reaction to the data was mixed though as we initially saw a spike in different directions against the majors and then quickly faded.  Overall, Sterling is having a mostly positive day with exception against the Yen and the Greenback, but holding for now near session opens.

The other big mover of the session is the New Zealand Dollar, taking a big hit after printing weaker-than-expected CPI and dairy auction data during the Asia session.  The selloff seems to not only have stabilized during the morning London session, but we’re currently seeing pullbacks from the weakness.  NZD/USD is down 55 pips (-0.64%), but it seems to have found a bottom around the .8700 major psychology handle.

The forex calendar for the Wednesday afternoon U.K./morning U.S. trading session is once again packed with juicy economic data and central bank events for forex traders to sink their teeth into.

At 1:30 pm GMT, we’ll get Canadian Manufacturing Sales and U.S. Producer Price Index (PPI) data.  Both are potential short-term market movers and expected to come in above their previous reads to get into positive territory.

Then starting at 2:00 pm GMT, we’ll get more U.S. data in the form of Net Long-Term TICS Flows, industrial production and capacity utilitzation.  These are all mid-tier events, so the potential for volatility increasing is only there if we see a big surprise, but even then, I think traders will start to head to the sidelines in anticipation of the upcoming main events of the morning U.S. session.

At 3:00 pm GMT, we’ll get another session of Fed Chair Janet Yellen reporting to the U.S. Congress on economic conditions and future outlook.  Having already testified to the Senate yesterday, currency traders aren’t anticipating any new developments in monetary policy since then.  This is most likely a non-event, but one you should stay on your toes for.

And finally, we’ll probably get a big boost in volatility for the Loonie as the Bank of Canada releases their latest monetary policy decisions and economic outlook, also at 3:00 pm GMT.  The expectation is for the BOC to maintain overnight interest rates at 1.00% and stick to the script that they see low inflation as the current risk, despite a tick higher in recent price reads.  The overall data for Canada has been mixed but leaning towards weakness in recent months, so the speculation is that BOC Governor Poloz will most likely refrain from any hawkish commentary, or even be “neutral.”  The expectation is for nothing new from this event, but every monetary policy statement has the potential to pack a punch, so be safe and stay frosty with your Loonie orders and positions at this time.

See also:

Asia Session Recap

U.S. Session Recap

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