London Session Recap – Aug. 7, 2014

  • German Industrial Production m/m: 0.3% vs. 1.2% forecast, -1.7% previous
  • French Trade Balance: -5.38B EUR vs. -4.91B EUR, -4.87B EUR
  • No change to Bank of England monetary policy as expected; Main rate stays at 0.5%, monthly bond purchases at 375B GBP
  • European Central Bank also leaves main rate at 0.15%; ECB press conference at 1:30 am GMT

As expected, forex volatility was relatively low ahead of the major events of the day: the monetary policy decisions from the BOE’s Monetary Policy Committee and the European Central Bank.  Both banks made no changes to their policies as expected.

For the British Pound, the initial reaction has been negative, which may follow through to the end of the session since the MPC’s decisions aren’t follow by a press conference; we won’t hear about the MPC’s thought processes on the decision until we get the Meeting Minutes in a couple of weeks .  Sterling had a nice rally in Asia and into London trading, but it’s now paring its gains. GBP/USD is the exception, now down on the session 10 pips (-0.06%) to 1.6838, but holding near the day’s lows.

The Euro had a much more muted reaction to the no change in policy, which is the norm as currency traders usually sit back and wait for Draghi’s press conference at 1:30 pm GMT before making their moves on the shared currency.  That’s when the fireworks usually happens, and when it makes sense to be very alert and ready to adapt because volatility can spike very, very fast.  This press conference will be especially interesting as reporters will likely question Draghi on the possible effects that the geopolitical tensions with Russia is having on Europe.

We’ve got another light forex calendar for the afternoon U.K.morning/U.S. session, but what we’ve got have the potential to spark additional forex volatility.

At 1:30 pm GMT, we’ll get another read on Canadian housing in the form of Building Permits, with a forecast of a -1.9% dip vs. 13.8% rise previous.  That previous number is a bit of an outlier relative to recent weak data, so we’ll see if there’s a shift in housing demand. We’ll also get the weekly U.S. initial claims report, forecasted to come in at 304K new claims vs. 302K claims last week.

At 3:00 pm GMT, we’ll get the Canadian Ivey PMI report for another read on economic conditions in the Great White North.  Conditions are forecasted to come in better-than-previous at 53.0 vs. 46.9 previous, much better than the below 50, contractionary levels of the past two months.

Finally, at 8:00 pm GMT we’ll get a read on U.S. consumer credit, expected to come in around $18.65B vs. $19.6B previous.  This data point is not normally a market mover, but since it is an indicator of consumer sentiment, it’s something to pay attention if we get an outsized surprise from the actual read.  Stay Frosty!

See also:

Asia Session Recap

U.S. Session Recap

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