London Session Forex Recap – Oct. 31, 2014

  • German Retail Sales m/m: -3.2% vs. -0.9% forecast, 1.5% previous
  • French Consumer Spending m/m: -0.8% vs. -0.3% forecast, 0.9% previous
  • European Flash HICP: 0.4% vs. 0.4% forecast, 0.3% previous; Core HICP at 0.7% vs. 0.8% forecast, 0.8% previous
  • European unemployment inline with 11.5% forecast/previous

European and London traders continued the push lower on the Japanese yen after waking up to see the Bank of Japan increase their annual stimulus program to 80 trillion yen from a 60 – 70 trillion yen range previous during the Asia session. It was a complete shock to everyone, which is why we saw no sell off in the yen prior to the event and a massive selloff afterwards.  The move seems to have slowed down at the moment, but the yen is still down huge across the majors:

USD/JPY is up 240 pips (+2.2%) to 11.59, EUR/JPY is up 267 pips (+1.94%) to 140.39, and GBP/JPY is up 385 pips (+2.21%) to 178.55

Besides the BOJ news, we saw weak consumer data (German retail sales and French consumer spending), and the weak core inflation read from Europe putting pressure on the euro, with exception against the yen of course.  The euro has bounced from session lows against a few of the majors, but momentum still looks to be in favor of the euro bears with weakening inflation leaving the door open for stimulus from the ECB:

EUR/USD is down 33 pips (-0.27%) to 1.2578, EUR/GBP is down 21 pips (-0.28%) to .7858, and EUR/NZD is down 92 pips (-0.57%) to 1.5981

The forex calendar for the final afternoon London/morning U.S. session is relatively busy with both Canadian and U.S. data in the lineup.

At 12:30 pm GMT, the main event for the U.S. session is coming in the form of the monthly Canadian GDP report.  The forecast is for another 0.0% change, inline with the previous read of 0.0% change. If this number comes in as expected or weaker, that would start to push the overall trend to the down which is most likely not good for the Loonie.

At the same time, from the U.S. we’ll get a slew of mid-tier data including the core PCE price index, employment cost index, and personal spending and income.  These are not normally big market movers, but definitely ones to watch for Greenback positions in case we see big surprise.

And to round out the week, at 1:45 pm GMT we’ll get the Chicago PMI read (60 forecast vs. 60.5 previous) and at 1:55 pm GMT, we’ll get the final read on the University of Michigan sentiment survey (86.4 forecast and previous).  Both are also mid-tier events, so we shouldn’t see too much of a reaction without a big surprise from either the previous or expectations.

Overall, the additional stimulus from the Bank of Japan will most likely continue to influence not only the Japanese yen but also broad risk sentiment.  We’re seeing a risk-on reaction to today’s news, pushing global equities higher, gold and silver lower, and broad strength in the higher yielding currencies against the safe haven currencies.  It should be an interesting close to a great week of forex trading. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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