London Session Forex Recap – Oct. 14, 2014

  • U.K. CPI m/m falls to 0.0% vs. 0.2% forecast, 0.4% previous; y/y falls to 1.2% vs. 1.4% forecast, 1.5% previous
  • German ZEW Economic Sentiment: -3.6 vs. 6.9 previous
  • European Industrial Production m/m: -1.8% vs. -1.6% forecast, 0.9% previous

Low global growth concerns continue to drive forex price action, with fresh data to fuel the strong moves coming from Germany and the U.K.

The big currency mover in the morning London session was the British pound, falling fast after another disappointing read on both the monthly and yearly numbers. This continues puts pressure on the Bank of England to keep borrowing interest rates low, bringing the Sterling bears out quickly.  After trading around 1.6075 during Asia, GBP/USD has fallen as low as 1.5915 on the news, with momentum still on the side of the bears. GBP/JPY  has fallen big time, from 172.00 at the London open to current levels hovering just above the major 170.00 handle.

Once again, German data contributes to global growth worries today with the German ZEW surveys showing falling confidence in Europe’s largest economy.  We also saw industrial production levels fall across the Eurozone, adding to the weaker outlook across the board.  It’s no wonder that the euro also went into bear mode at the European open, but the losses have been mild so far relative to big volatility during the Asia session.

Overall, it’s been a great session so far for Japanese yen bulls on the global growth and Ebola fears pushing traders out of risk assets:

EUR/JPY is down 93 pips (-0.68%) to 135.27, AUD/JPY is down 26 pips (-0.28%) to 93.40, and CAD/JPY is down 29 pips (-0.29%) to 95.00

The forex calendar for the Tuesday afternoon London/morning U.S. session is light once again, but volatility could pick up regardless as Canadian and U.S. traders come back from Monday’s holiday.  The only data point on the horizon is the U.S. budget data at 7:00 pm GMT, with a forecast of $86B vs. $75.1B previous. It’s a low tier event, so it may not garner any attention without a significant surprise read.

Most likely, we’ll continue to see forex price action continue to be influenced by global growth fears, Ebola fears, and risk sentiment pressures from the equity markets with U.S. earnings season soon underway.  That means more volatility is likely for the safe haven currencies like the U.S. dollar, Japanese yen and Swiss franc. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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