London Session Recap – Aug. 26, 2014

  • U.K. BBA Mortgage Approvals lower: 42.79K vs. 44.06K forecast, 43.18K previous

In terms of news headlines and data, this morning was pretty bare with only a read from the U.K. housing sector to give us an economic catalyst.  Economists were once again a bit too optimistic with their expectations as the BBA mortgage approvals number disappointed once again, coming in below the forecast and previous reads at 42.79K. There wasn’t much of a reaction from Sterling on the news, possibly due to the low participation rate and liquidity during these summer market conditions.

Where we did see action was in the Australian Dollar and Canadian Dollar.  Without direct catalysts–but possibly on China’s positive data during the Asia session–both currencies are trending higher against the majors.  The China data may even be keeping the Kiwi from dropping like a rock after posting a horrific trade balance number (692M NZD deficit vs. 475M NZD deficit forecast).  The Aussie Dollar is the big gainer on the session, without signs of slowing down at the moment:

AUD/USD is up 16 pip (+0.18%) to .9311, AUD/CHF is up 20 pips (+0.24%) to .8528, and the big winner of the day is AUD/NZD, up 36 pips (+0.33%) to 1.1167

Finally, the Japanese Yen is seeing some strength amid risk aversion sentiment, most likely on geopolitical tensions in Ukraine. We also saw a story that the BOJ continues to keep a bullish outlook on inflation, indicating we will not see any new easy money initiatives for 2014.  It looks like that sentiment may be short lived as the Yen rally seems to be slowing at the moment.  After hitting lows around 103.75, USD/JPY is back up to 103.93 to retest the 104.00 major psychological handle.

The forex calendar for the afternoon U.K./morning U.S. session is pretty heavy with a mix of mid and top tier U.S. economic data points.

At 1:30 pm GMT, we’ll get the U.S. durable goods data to hopefully kick off fresh volatility in the Greenback.  The headline read is expected to come in above the previous read at around 8% vs. 1.7% previous.  The core number (excludes transportation items, which can add volatility and skew the monthly reads) is forecasted to come in lower at around 0.5% vs. 1.9%.  So, it looks like we may get mixed reads, and if we do, look for choppiness rather than a directional reaction from forex traders in the Dollar.

At 2:00 pm GMT, we’ll see updates on the U.S housing sector in the form of the FHFA House Price Index and the S&P Case-Shiller Home Price Index.  Both are expected to come in below their previous reads, a trend lower that’s starting to form with both data points.  If that’s the case, we could see broad risk sentiment take a hit on the news.

And at 3:00 pm GMT, we’ll get the CB Consumer Confidence number for a read on consumer sentiment, as well as the Richmond Manufacturing index to gauge conditions in the mid-east. The former is the big tier event, expected to tick lower to 89 vs. 90.9 previous, and this event is important as it is viewed as a leading indicator of consumer spending–a large portion of GDP.  With an action packed calendar, it’s a good idea to be nimble and stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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