London Session Recap – Aug. 5, 2014

  • European Services PMI ticks lower: 54.2 vs. 55.4 forecast, 54.4 previous
  • European Composite PMI weaker: 53.8 vs. 54.4 previous
  • U.K. Services PMI is higher: 59.1 vs. 58 forecast, 57.7 previous
  • European Retail Trade m/m: 0.4% vs. 0.5% forecast, 0.3% previous; y/y higher at 2.4% vs. 1.4% forecast

Forex volatility picked up in a big way for the morning London session thanks to mixed services PMI data from Europe and the U.K.

Despite many countries coming in above expectations, the broad European read on services PMI came in weaker-than-expected.  And it wasn’t until we saw the weak read from Italy (52.8 actual vs. 53.2 forecast, 53.9 previous) that forex traders decided to place their bets, mostly to send the euro lower.  The fall has stabilized for now thanks to mixed but mostly positive retail sales data, but we did see notable breaks in support for EUR/USD–down 32 pips (-0.24%) to 1.3387 and holding below 1.3400

The British Pound was also on the move after a surprise jump in the services PMI read, which brings a bit of relief to Sterling bulls after a slew of recent weak economic data from the U.K. The reaction was a bullish one for the Pound, and with exception to the Greenback, the gains are holding for now.

EUR/GBP is down 20 pips (-0.26%) to .7936, GBP/JPY is up 23 pips (+0.13%) to 173.14, and GBP/CAD is on of the big movers on the session, up 75 pips (+0.40%) to 1.8460

The calendar for the afternoon U.K./morning U.S. session has a few U.S. economic data points that should keep the volatility up forex traders to feed on.

At 2:45 pm GMT, we’ll get the services PMI data for the U.S., with the forecast to come inline with the previous read of 61.  This looks like a low tier event for the Greenback, but one to take note of if disappoints, especially after mostly strong numbers from the European region.

Then at 3:00 pm GMT, we’ll get the bulk of the U.S. data in the form of factory orders, IBD consumer optimism, and the ISM Non-Manufacturing.  ISM Non-Manufacturing is marked as the top tier event and the one to watch with forecasts that it will come in around 56.5, above the 56.0 previous read. This could be a solid catalyst for the Greenback to close out the London session, so stay frosty forex friends!

See also:

Asia Session Recap

U.S. Session Recap

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