London Session Recap – Sept. 4, 2014

  • French ILO Unemployment Rate ticks higher as expected: 10.2% vs. 10.2% forecast, 10.1% previous
  • German Factory Orders improve: 4.6% vs. 1.5% forecast, -2.7%
  • Bank of England holds interest rates at 0.5% and monthly asset purchases at 375B GBP
  • European Central Bank cuts benchmark interest rate to 0.05% from 0.15%
  • U.S. ADP Non-Farm Employment Survey:    204K vs. 220K forecast, 218K previous

Ahead of major central bank statements, forex market volatility was light in the morning London session,  but picked up big time thanks to the ECB rate cut.

The euro was slammed lower after the European Central Bank announced a 10 basis point cut to the main rate to 0.05%, as well as a cut in the deposit rate to -0.20%.  This was a surprise for forex traders who were expecting a possible quantitative easing move from the ECB instead.  The news is pretty fresh, but so far the euro is down big on the session with strong momentum still in play:

EUR/USD down 102 pips (-0.77%) to 1.3047, EUR/JPY down 61 pips (-0.45%) to 137.06, and EUR/GBP down 47 pips (-0.59%) to .7938

The Bank of England also made a monetary policy statement this morning, keeping the main rate at 0.50% and monthly asset purchases at 375B GBP.  The reaction was mute compared to the ECB event, not only on the lack of change but also on the fact we won’t get to hear commentary and the outlook from the BOE until the meeting minutes later this month.

The  forex calendar for the Thursday afternoon U.K./morning U.S. session is pretty action packed as well with mostly U.S. data and the ECB press conference to hopefully get the market really going.

At 1:30 pm GMT, we’ll get Canadian data in the form of Merchandise Trade, with an expectation of a dip to 1.15B CAD vs. 1.86B CAD.

We’ll also get U.S. trade balance numbers (-$42.4B vs. -$41.5B forecast), as well as more data on the U.S. jobs sector in the form of unit labour costs, non-farm productivity, and weekly initial jobless claims.  These are low to mid tier events, so don’t expect much reaction with a big surprise, especially as currency traders focus on the start of the ECB monetary policy press conference.

And to close out the European session, at 3:00 pm GMT, we’ll get the U.S. ISM non-manufacturing PMI data for one last kick in volatility before London traders call it a day.  The forecast is for the number to tick lower to 57.5 vs. 58.7 previous, which would be a minor hiccup in a number that has been trending higher since March 2014.

With so much going on, the event to pay the most attention to is the ECB press conference, which can be just as volatile as the monetary policy statement itself, so this is one trading session you can’t relax on.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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