London Session Recap – July 25, 2014

  • German IFO survey data comes in weaker – Expectations 103.4 vs. 103.4 forecast, 104.8 previous; Business Climate at 108.0 vs. 109.4 forecast, 109.7 previous; Current Conditions at 112.9 vs. 114.5 forecast, 114.8 previous
  • U.K. GDP (1st. Est.) comes inline with expectations – y/y at 3.1% vs. 3.0%; q/q inline with previous at 0.8% as expected

Forex volatility picked up in the London session thanks to weak German data, a read on U.K. GDP, and momentum in the Kiwi.

First, German IFO survey data on business conditions weren’t good, coming in below both expectations and previous reads.  The trend has been lower since March, which is not a good sign as the survey does gather business sentiment on both current and future conditions in Germany (Europe’s largest economy).  Forex traders quickly went into sell mode on the news but the volatility increase was pretty mild, bringing the euro down only a bit on the session:

EUR/USD is down 18 pips (-0.14%) to 1.3443, EUR/JPY unchanged to ride the 137.00 handle, and EUR/GBP is down only 7 pips (-0.09%) to .7916

We also saw the preliminary GDP read from the U.K., coming inline with expectations and mostly inline with previous reads; the year-over-year number came in a tick above the 3.0% previous read.  It looks like forex traders took that as a good sign as Sterling saw light buying to elevate it and keep it green across the board.  The lone exception is against the Greenback, but currently unchanged on the session as GBP/USD trades around 1.6982.

Outside of Europe, the Kiwi decline (sparked by the RBNZ announcing a pause to rate hikes after raising the main rate to 3.50% yesterday) continued steadily in Europe, but currently stabilizing at the moment. And the Greenback is seeing support on expectations of positive U.S. data later in the session:

USD/JPY is up 10 pips (+0.10%) to 101.89, USD/CHF  is up 12 pips (+0.14%) and the big mover on the session is NZD/USD, down 24 pips (-0.28%) to .8546

The forex calendar for the Friday afternoon U.K./morning U.S. trading session is incredibly light, but with lots of potential to move on important U.S. economic data.

At 1:30 pm GMT we’ll get the June durable goods numbers to give us another read on the health of the manufacturing sector.  The May read was a surprisingly weak one at -0.9%, so if we hit the 0.5% forecast on both headline and core, we could see another quick boost for the Greenback on the session.  Beware of quick fade potential of this number since we did see the Greenback rally during Europe.

And with very little in the way of economic catalyst, pay attention to the equity market for cues on broad risk sentiment as it may be the only driver for currencies as we head into the weekend. Asia closed mostly higher (Nikkei 225 up 173.45 or 1.13%) but we’re seeing weakness in Europe (FTSE 100 down -7.37 or -0.11% and CAC 40 down -29.91 or -0.68%) and mixed changes in the U.S. futures.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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