London Session Forex Recap – Oct. 27, 2014

  • German IFO Business Expectations: 98.3 vs. 99.2 forecast, 99.3 previous
  • German IFO Business Climate: 103.2 vs. 104.5 forecast, 104.7 previous
  • German IFO Current Conditions: 108.4 vs. 110.0 forecast, 110.4 previous
  • European M3 Money Supply y/y: 2.5% vs. 2.2% forecast, 2.0% previous
  • U.K. CBI Distributive Trades: 31 vs. 25 forecast, 31 previous

European bank stress test results and weak German data had forex traders putting the pain on euro longs in this morning’s opening London trade. After hitting highs during the Asia session, euro pairs started to fall right at the London open, presumably on forex traders repricing in risks in the European economy after it was shown that 25 lenders failed to get a clean bill of health with the release of the European bank stress tests.

And the pain didn’t stop there for euro longs as we got the monthly Ifo Institute’s business survey results, showing less confidence in the current and future outlook in Germany. More weakness in Europe’s largest economy pushed EUR/USD as low as 1.2665 on the session after hitting highs around 1.2713 during the Asia session.  The fall seems to have slowed on most euro pairs, and we’re actually starting to see some decent bounces against the commodity dollars.

Broad risk sentiment may be the cause of that comdoll weakness, which is sparked by another possible new case of Ebola in New York City. A 5-year old boy is currently being observed for signs of Ebola after arriving in the U.S. from Guinea with a 103 degree Fahrenheit fever. Besides weakness in the comdolls, we’re seeing broad strength in the Japanese yen, which is typical in risk-off environments:

USD/JPY is down 31 pips (-0.29%) to 107.81, AUD/JPY is down 33 pips (-0.32%) to 94.83, and CAD/JPY is down 29 pips (-0.33%) to 95.90

The forex calendar for the Monday afternoon London/morning U.S. session is much lighter relative to the London session with only U.S. pending home sales set for release at 2:00 pm GMT.  The forecast is for a 1% increase in sales vs. -1.0% in the previous month.  This is a mid-tier event, so we may not see much of a reaction unless we get a read far off of the expected or previous reads.

With such a light calendar, it looks like currency influence will continue to come from broad risk sentiment, fresh Ebola news, and/or hints of future rate hikes from the FOMC or BOE. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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