London Session Recap – Sept. 15, 2014

  • U.K. CPI m/m inline with forecast of 0.4%, above -0.3% previous
  • U.K. PPI Input falls below forecast: -0.6% vs. -04% forecast, but above -1.7% previous
  • German ZEW Sentiment declines to 6.9 vs. 8.6 previous, but above 5 forecast
  • European ZEW Sentiment declines to 14.2 vs. 23.7 previous

Economic data was disappointing from the European region this morning, with the most notable reactions coming from the British Pound.  We saw the U.K. release inflation numbers that reached the lowest level in five years, and when combined with the continued Scottish referendum vote drama, Sterling bulls became scarce for the day. Although the pain for the pound seems to have leveled off for now, it is down across the board on the session:

GBP/USD is down 35 pips (-0.22%) to 1.6195, GBP/JPY is down 50 pips (-0.285) to 173.46, and EUR/GBP is up 21 pips (+0.27%) to .7991

The rest of the currency market looks mixed with no other major catalysts to create strong directional biases, but the other currency move of note is the U.S. Dollar, which seems to be pulling back from recent strength, most likely some profit taking as the FOMC begins its two day meeting before releasing it’s highly anticipated monetary policy decision tomorrow.  The Greenback is taking small hits across the board after a rally during Asia trade, even against the beaten up comdoll pairs, to now be down on the session:

USD/JPY is down 10 pips (-0.10%) to 107.06, USD/CHF is down 19 pips (-0.20%) to .9330, and NZD/USD is down 12 pips (-0.15%) to .8161

The forex calendar for the Tuesday afternoon London/morning U.S. session is likely to bring more volatility thanks to Canadian and U.S. economic data.

At 1:30 pm GMT, we’ll get the monthly Canadian manufacturing sales data, forecasted to increase to 1.1% vs. 0.6% previous.  The Loonie has found a bid today, so if we do see a positive read, that could mean potentially more strength on the session.

At the same time, we’ll also get inflation data from the U.S. in the form of the Producer Price Index data, forecasted to dip lower to 0.0% from 0.1% previous on the headline read, and down to 0.1% vs. 0.2% previous on the core read.  This could add to the morning London session weakness that we saw on the Greenback if we do get lower numbers.

And at 2:00 pm GMT, we’ll get the Net Long-term TICS flows data for a read on investment capital going in and out of the U.S.  The forecast is for $25B vs. -$18.7B previous, but the data point tends to disappoint relative to forecasts so I’d be careful by waiting for the actual print.

Finally, broad risk sentiment looks like it’s on the downturn as equity markets around the globe are looking red on the session (FTSE 100 down -0.46% and Nikkei 225 down -0.23%), so you may want to pay attention to the safe haven currencies like the Japanese Yen and Swiss Franc for potential strength if the sentiment continues.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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