London Session Recap – Sept. 19, 2014

  • German PPI m/m remains at -0.1% forecast/previous; y/y stays at -0.8% forecast/previous
  • European Current Account ticks higher to 18.7B EUR vs. 18.6B EUR previous
  • Scotland voted “No” to Independence by a 55% to 45% margin

The big forex market driver of the morning is the “No” vote to keep Scotland as a part of the United Kingdom, sparking big moves across all currencies.

It looks like forex traders were actually anticipating that Scotland would vote against independence during the Asia session, pushing GBP/USD up 200 pips before topping out just above the 1.6500 handle.  Since then, Sterling has pulled back strongly on what could be a “buy the rumor, sell the news” reaction, pushing some Sterling pairs back into negative territory, making it a very volatile session for pound traders.

GBP/USD is down 64 pips (-0.38%) to 1.6324, GBP/JPY is down 59 pips (-0.32%) to 177.63, and and EUR/GBP is down 10 pips (-0.13%) to .7866

The Scottish event had a positive effect on broad risk sentiment, not only pushing the equity markets higher, but also pushing up risk currencies (like the comdolls) to reverse recent weakness in currencies like the Aussie and Kiwi.  And the combination of risk-on flows and pound strength seems to taking flows away from the euro, which is taking a hit across the board on the session:

EUR/USD is down 64 pips (-0.50%) to 1.2851, EUR/AUD is down 55 pips (-0.38%) to 1.4314, and EUR/NZD is down 62 pips (-0.40%) to 1.5777

The forex calendar for the final afternoon London/morning U.S. session is relatively light, with mostly Canadian events to potentially add to this morning’s volatility.

At 1:30 pm GMT, we’ll get potential market movers for the Loonie in the form of wholesale sales and consumer price index data (CPI).  The CPI number is the more influential of the two on price action, with forecasts of an improvement in both the headline and core reads on consumer inflation. This number has been on somewhat of a trend lower, so a positive read could add to what has already been a good economic data week for the Loonie.

And to close out this week’s data, at 3:00 pm GMT we’ll get U.S. leading indicator data, with a forecast of 0.4% vs. 0.9% previous.  This is a low tier event, so it probably wouldn’t spark any reaction without a huge surprise.  So for the rest of the session, the Scotland vote and broad risk sentiment will most likely be the main drivers into the weekend. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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