London Session Recap – July 22, 2014

  • Swiss Trade Balance lower: 1.38B CHF vs. 2.78B CHF forecast, 2.85B CHF
  • U.K. Public Borrowing mixed: 11.4B GBP above 10.5B GBP forecast, but below 13.7B GBP previous
  • U.K. CB Industrial Trends much lower: 2% vs. 8% forecast, 11% previous

It looks like forex traders came to play today, and the name of the game was USD bullishness and EUR weakness in the morning London session.

We’re seeing these moves possibly on a combination of continued geopolitical tensions between Russia and West, potentially setting up sanctions both ways that could hurt both Russia and their trading partners in Europe.  Also, the Greenback is getting a lift ahead of potentially critical CPI report coming up early in the U.S. session.  This made for a strong move lower in EUR/USD right from the open; since the Asia session high of around 1.3528, EUR/USD has fallen around 40 pips to break below the crucial 1.3500 handle, currently trading around 1.3485.  Today’s environment seems to have had a broad negative affect on all Euro and Franc pairs, especially against the Aussie after RBA Governor Stevens lack of commentary on the Aussie during the Asia session:

EUR/AUD is down 60 pips (-0.42%) to 1.4363 and AUD/CHF is up 42 pips (+0.42%) to .8458

We also saw mixed economic data from the U.K. with public borrowing coming in above expectations but below forecasts, and the CBI industrial trends data coming in much lower, indicating that order volume is slowing in the manufacturing sector.  The reaction in Sterling seems to be mixed against the majors, but it is lower on the session against the Greenback, testing minor support on GBP/USD around 1.7060.

The forex calendar for the Tuesday afternoon U.K./morning U.S. trading session has important U.S. economic data points to spark volatility for forex players.

At 1:30 pm GMT, as previous mentioned we’ve got the U.S. Consumer Price Inflation data, with expectations of a 0.3% increase from the previous read on the headline number.  This expectation is mainly due to the recent increase in energy prices, and if we do see a rise for whatever reason, it calls for more support for an earlier rate hike from the Fed.  That framework makes this a potential market mover and event to watch for the session.

To close out the London session, we’ll get housing data from the U.S. starting with the FHFA House Price Index at 2:00 pm GMT and Existing Home Sales at 3:00 pm GMT.  The house price data has been erratic but seems to be slightly trending higher, while existing home sales has been ticking up in 2014.  Positive reads would most likely give the Greenback a boost, but a negative one to counter recent trends will likely cause bigger, short-term volatility.

Also, at 3:00 pm GMT, we’ll get the Richmond Manufacturing Index.  The forecast is for a tick up to 5 vs. 3 previous, but since this is a low tier event, we may not get much reaction, especially with geopolitical issues in the front seat to steer the markets.

See also:

Asia Session Recap

U.S. Session Recap

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  • DarkForce

    any idea why AUD is not losing ground against USD? there is no weakness in AUD.

    • Pipcrawler

      Hey DarkForce…I’ll answer this one for ya. RBA Governor Stevens spoke today without mentioning the Aussie or monetary policy. The last time he spoke, he called the Aussie “overvalued” so when he didn’t mention anything, the market took that as a good sign. It’s all in the Asia Session Recap link above. Check it out!

      • DarkForce

        Thank you so much for prompt reply, AUD is finally losing steam and going down, I read all analysis from you guys, keep up the good work.

        • Pipcrawler

          You’re welcome DarkForce! Yeah, the move was faded in the morning U.S. session. Thanks for checking us out and glad to hear you like what we’re doing 🙂