London Session Forex Recap – Dec. 12, 2014

  • German Wholesale Price Index m/m: -0.7% vs. -0.6% previous
  • French Current Account: -0.9B EUR vs. -1.2B EUR previous
  • U.K. Construction Output m/m: -2.2% vs. 0.7% forecast, 2.2% previous
  • European Industrial Production m/m: 0.1% vs. 0.2% forecast, 0.5% previous

Lots going on in the forex markets this morning, with the euro headlining price action thanks to news that we’ll see more LTRO repayments to the ECB and that they will be significantly higher than previous payments of around 14B euros. The step up in payments is good sign that European banks are healthier than previously thought.  The euro went on a tear higher against the majors and volatility is high going into U.S. trade:

EUR/USD is up 35 pips (+0.29%) to 1.2444, EUR/JPY is up 20 pips (+0.14%) to 147.37, and EUR/GBP is up 37 pips (+0.47%) to .7923

This move in the euro is having a big affect on the Swiss franc, which tends to move with the euro because of their close trade ties. The franc went into rally mode to continue yesterday’s strength after the Swiss National Bank (SNB) monetary policy meeting where no new action was taken. Forex traders are expecting to the SNB to make a move to limit franc strength, but it until we see action taken, it looks like currency traders are still in bull mode:

USD/CHF is down 31 pips (-0.33%) to .9644, EUR/CHF is down 2 pips (-0.02%) to 1.2008, and GBP/CHF is down 70 pips (-0.46%) to 1.5147

Finally of note, we’re seeing weakness in the Canadian dollar, taking a hit as oil continues its plunge going into the weekend. WTI crude prices are trading around the $59 area, levels not seen since 2009, and because oil is a very big part of Canada’s export economy, the Canadian dollar is taking a hit as well:

USD/CAD is up 44pips (+0.39%) to 1.1565, CAD/JPY is down 69 pips (-0.67%) to 102.24, and EUR/CAD is up 102 pips (+0.71%) to 1.4396

The forex calendar for the Friday afternoon London/morning U.S. session is light with only a couple of U.S. economic data points to take us into the weekend.

At 1:30 pm GMT, we’ll get the U.S. producer price index numbers, with analysts forecasting a dip in both the headline and core numbers.  Inflation data and its outlook continues to be a major forex market influence, so we’re likely to see short-term volatility pick up for the U.S. dollar, possibly to the downside if we do see lower numbers.

At 2:55 pm GMT, we’ll get the preliminary University of Michigan sentiment survey numbers, forecast to improve to 89.5 vs. 88.8 previous.  With all of the positive data we’ve seen from the U.S. lately, including a big gain in U.S. employment conditions, it’s very likely we will see an improvement in sentiment.  This is a mid-tier event so if we do see a reaction, it’ll likely be a short-term pop in volatility for the Greenback.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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