London Session Forex Recap – Oct. 10, 2014

  • French Industrial Production m/m weaker: 0.0% vs. -0.3% forecast, 0.3% previous
  • French Manufacturing Production m/m better-than-expected: -0.6% vs. -0.7% forecast, 0.4% previous
  • U.K. Trade Balance improves: -9.1B GBP vs. -9.6B GBP forecast, -10.41B GBP previous
  • U.K. Construction Output m/m weaker: -0.3% vs. 2.9% forecast, 4.3% previous

Lots of movement in this morning’s London session with global slowdown fears pushing up forex volatility and capital to safe haven assets.

On the forex calendar, we saw weak reads from Europe and the U.K. with current numbers coming in mostly below previous reads.  The one outlier was the U.K. trade balance number coming in at -9.1B GBP vs. -10.41B GBP, but still shows a trade deficit with the rest of the world. Both the euro and the British pound are seeing mixed priced behavior, down against the “safe havens” like the Greenback (EUR/USD from 1.2700 to 1.2650 and GBP/USD from 1.6125 to 1.6040), but up against the “risk currencies” like the commodity dollars (EUR/AUD went from 1.4460 to 1.4545 and GBP/AUD went from 1.8360 to 1.8435).

Again, with both European region and Asia economic data weakening sparking fears, safe haven currencies have benefitted as forex traders start to run from the “risk-on” currencies.  Selling ramped up in the commodity dollars right from the start of European trading, with the biggest moves among the major currencies coming from the Aussie pairs:

AUD/USD is down 72 pips (-0.82%) to .8709, AUD/JPY is down 81 pips (-0.86%) to 93.88, and AUD/CHF down 49 pips (-0.59%) to .8330

The forex calendar for the Friday afternoon London/morning U.S. trading session is pretty light, but could pack a punch with major data from Canada.

At 1:30 pm GMT, we’ll get U.S. import price index data for a fresh read on U.S. trade conditions (-0.7% forecast vs. -0.9% previous), but the big mover of the session will come from Canada in the form of the monthly employment report.  The forecast is for a net increase to 20K jobs created vs. -11K jobs decrease in August.  The unemployment rate is forecasted to remain steady at 7%.  There is a high probability that this could spark big short-term volatility for the Loonie, especially since this number tends to see-saw back and forth between positive and negative with each release.

We’ll get the monthly U.S. government budget data at 7:00 pm GMT, with spending forecasted to have risen to $82B vs. $75.1B previously.  This is a low tier event, but government spending is something to keep tabs on given the debt levels created since the financial crisis and its contribution to the broad economy.

Finally, it’s a strong risk-off day in the global financial markets, so currencies may take cues from the U.S. equity markets, potentially having strong influences on the U.S. dollar and Japanese yen.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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