London Session Forex Recap – Nov. 6, 2014

  • German Factory Orders m/m: 0.8% vs. 2.2% forecast, -4.2% previous
  • U.K. Halifax House Price Index m/m: -0.4% vs. 0.4% forecast/previous
  • U.K. Industrial Production m/m: 0.6% vs. 0.4% forecast, -0.1% previous
  • U.K. Manufacturing Production m/m: 0.4% vs. 0.3% forecast, 0.2% previous
  • Bank of England holds base rate at 0.5% and bond program at 375B GBP
  • European Central Bank holds main refinancing rate at 0.05%, holds deposit rate at -0.2% both as expected

The Bank of England kept interest rates at 0.5% and made no changes to its 375B GBP bond purchasing program this morning. This was widely expected, so it’s no surprise that the market reaction was relatively muted.  This could also be due to the weakness the British pound saw ahead of the MPC decision; GBP/USD is down to 1.5940 after hitting a high around 1.6000 during the Asia session, and this is despite improved manufacturing and industrial production numbers.

For now, British pound traders will have to wait for the BOE’s monetary policy committee’s meeting minutes for hints on when we may see a rate hike for the U.K., either in Q1 2015 or much later down the road as the markets currently expect.

The European Central Bank held the main refinancing rate at 0.05%, which did spark some euro selling but also muted as expected. We typically do not see big reactions to the ECB monetary policy events until the press conference, which is scheduled to begin at 1:30 pm GMT.  It should provide lots of fireworks for forex traders with not only economic issues to address, but also on speculation that there is discord between the board members and ECB President Mario Draghi.  For now, EUR/USD is holding steady, still trading around pre-announcement levels just above the major 1.25 handle.

Besides the ECB press conference, the forex calendar for the Thursday afternoon London/morning U.S. session has a healthy mix of mid-tier events from the U.S. and Canada to bring some action to the Greenback and Loonie.

At 1:30 pm GMT, we’ll get a few snapshots on the U.S. employment sector with reads on unit labor costs, non-farm productivity and the weekly initial jobless claims.  These are not usually market movers, but for you hard core NFP watchers out there, it could give more hints on what we may see with tomorrow’s U.S. government jobs numbers.

We’ll also get a fresh read on the Canadian housing market in the form of the monthly building permits data, forecast to significantly improve at 5% vs. -27.3% previous.

The building permits data may not cause too much reaction in the Loonie as forex traders may wait for the final Canadian number of the day, the Ivey PMI number at 3:00 pm GMT.  The forecast is for a dip to 57.3 vs. 58.6 previous, and maybe we’ll see strong volatility then for the Canadian dollar.

Also at 3:00 pm GMT, we’ll get the final economic number of the day, in the form of the U.K. NIESR GDP estimate (a broad read on economic health), which previously came in at 0.7%.  Since this number is coming near the end of European trade, it may have a final influence on London session traders before they square up their books for the day.

See also:

Asia Session Recap

U.S. Session Recap

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