London Session Forex Recap – Oct. 17, 2014

  • No economic data releases from European region

Despite an empty calendar and no major, forex volatility stay active, but it was mostly choppiness in the morning London session.

The euro was active, most likely on various comments from European Central Bank (ECB) members throughout the morning, and the debate on what policies the ECB and European governments should implement to help the weakening Euro zone.  What is the outlook for 2015 with recent data weakening? Should the ECB buy asset back securities (ABS)? What are the risks and benefits?  Will it be enough or will it also take government reform?

It’s a lot of issues that don’t seem to be confined to Europe as we also had members from the Bank of England members wavering in their outlook, most notably BOE member Andrew Haldane who said this morning that he was in favor of keeping rates low for longer given the change in economic data.

With these comments, both the euro and the British pound should have taken a hit, but it looks like the fear trade on global growth, geopolitical and Ebola fears are subsiding today.  Right from the London open, forex traders have been coming out of safe haven currencies, possibly taking profit on this week’s big volatility, squaring away positions ahead of the weekend, or the possibility the Fed will keep rates low for longer.  This combination of variables tends to be a rough situation for the Japanese yen, which is down on the session:

EUR/JPY went from 135.80 at the London open to a high around 136.70, and GBP/JPY moved from 170.20 to hit as high as 171.80.

The forex calendar for the Friday afternoon London/morning U.S. session is light, but we do have major data points that keep up the increase in volatility from the London open.

At 1:30 pm GMT, we’ll get probably the big market mover, at least for the Loonie, in the form of Canadian consumer price index data. Price inflation is an important indicator of economic health, and it looks like Canada may see some weakness as the market is forecasting a lower core CPI read (0.2% forecast vs. 0.5% previous). The headline number is expected to tick up 0.1% vs. 0.0%, but with global inflation data showing lower reads (and the drop in oil prices), it’s a low probability we’ll see higher numbers.

The rest of the morning data will come from the U.S. with fresh reads on the housing sector at 1:30 pm GMT (building permits and housing starts) and at 2:55 pm GMT with the preliminary University of Michigan consumer survey data.  The housing sector data is forecasted to tick above previous reads, while the consumer survey data is forecasted to come in lower at 84 vs. 84.6.  All sets of data are considered to be mid to upper tier data points, so regardless of the outcomes, we should see volatility pick up nicely for the Greenback. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together. In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis. Head on to Big Pippin’s Daily Chart Art for some pip-locking technical setups!