London Session Forex Recap – Nov. 27, 2014

  • German Unemployment Rate: 6.6% vs. 6.7% forecast, 6.6% previous
  • German Unemployment Change: -14K vs. -1K forecast, -23K previous
  • European Economic Sentiment: 100.8 vs. 100.3 forecast, 100.7 previous
  • European GfK German Consumer Sentiment: 8.7 vs. 8.6 forecast, 8.5 previous

There was a lot going on in Europe this morning and even with a steady stream of better-than-expected data from Germany the euro went into sell mode, most likely due to the European Central Bank’s Financial Stability review released today and commentary from ECB members.

From the Financial Stability review, the ECB sees “Systemic stress among euro area banks and sovereigns declined further to levels last seen before the onset of the global financial crisis in 2007” and that the economic recovery continues to remain weak and uneven.  We also got comments from ECB member Vitor Constancio implying that the ECB will consider sovereign debt buying next quarter if current policy measures proves insufficient.

A weak outlook and the potential for more stimulus tends to put selling pressure on a currency, and the euro went into sell mode early in the London session.  It’s down against all of the majors on the session minus the British pound, which also seems to attracting sell orders without a direct catalyst that I can see at the moment.

EUR/USD is down 25 pips (-0.20%) to 1.2478, GBP/USD is down 39 pips (-0.25%) to 1.5750, and EUR/GBP is up slightly by 5 pips (+0.07%) to .7921

The forex calendar for the Thursday afternoon London/morning U.S. session is empty from the U.S. side because of the Thanksgiving holiday, but we do have a lone data point from Canada in the form of the current account data at 1:30 pm GMT.

The current account is the difference in value between exported and imported goods, services, investments, etc., which can be a good indicator of currency demand (increasing surplus means foreigners need to more of the local currency to buy goods). The forecast is for the number to tick slightly higher out of deficit territory, -11.2B CAD vs. -11.9B CAD, and on a thin liquidity day, could have a short term impact on the Loonie.

With the U.S. out on holiday, price action could stay pretty calm and technicals may be of more influence with the lack of fundamental catalysts.  Also, the Organization of Petroleum Exporting Countries (OPEC) meeting is being closely watched to see if they will cut production amid the big fall in oil prices.  The outcome could have an affect on oil related currencies, like the Loonie or the Norwegian krone, so it’s a good idea to keep an ear out for what’s going on there for a potential catalyst for volatility in the global markets.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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