London Session Forex Recap – Dec. 9, 2014

  • Swiss Unemployment (sa): 3.2% vs. 3.2% forecast, 3.1% previous
  • German Trade Balance: 21.9B EUR vs. 18B EUR forecast, 22.1B EUR previous
  • U.K. Manufacturing Production: -0.7% vs. 0.2% forecast, 0.6% previous
  • U.K. Industrial Production: -0.1% v.s 0.2% forecast, 0.7% previous

The British pound was a big mover after weaker-than-expected economic data, and the Japanese yen continued its rally on safe haven sentiment.

U.K. manufacturing and industrial production both came in much weaker showing that the U.K.’s recovery is decelerating, which supports a recent push back on rate increase expectations from the Bank of England. Sterling continued its weakness which actually began right from the London session open, indicating there may have been forex traders already anticipating weak data.  The pound is lower on the session (with exception against a broadly weak Greenback), but it looks like the downside momentum has receded:

GBP/JPY is down 149 pips (-0.78%) to 187.37, GBP/CHF is down 53 pips (-0.35%) to 1.5216, and GBP/NZD is down 57 pips (-0.28%) to 2.038

The other main story driving the markets this morning seems to be one of global risk aversion thanks to new restrictions announced for the Chinese corporate bond market and a returned focus to Greece and its political uncertainty.  For forex traders, that tends to result in a run to “safe haven” currencies, which could be the reason why we saw strong gains in the Japanese yen and Swiss franc through the Tuesday session.

During periods of fear and/or uncertainty, currency traders tend to sell higher-yielding (or riskier) currencies and buy back the low yielding currencies used to fund the trade.  The yen and the franc are both up on the session with momentum still in favor of both going into the U.S. session:

USD/JPY is down 103 pips (-0.86%) to 119.61, USD/CHF is down 42 pips (-0.46%) to .9714, and CHF/JPY is down 50 pips (-0.41%) to 123.10

The forex calendar for the Tuesday afternoon London/morning U.S. session is light with only a few data points coming out later in the session.

At 3:00 pm GMT, we’ll get the NIESR GDP estimate for the U.K. (0.7% q/q previous), and from the U.S. we’ll get IBD consumer optimism index (47 forecast vs. 46.4 previous) and wholesale inventories (0.2% forecast vs. 0.3% previous) data. These events are mainly mid-tier events that won’t likely cause market moves without big surprises.

With the lack of major economic data releases, the forex markets may continue to take their cues from the equity and bond markets, and today’s shift in sentiment towards risk aversion.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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