London Session Forex Recap – Dec. 18, 2014

  • Swiss National Bank sets libor rate to -0.25%
  • Swiss Trade Balance improves to 3.87B CHF vs. 2.92B CHF forecast, 3.23B CHF previous
  • German IFO Business Climate: 105.5 vs. 105.5 forecast, 104.7 previous; Expectations: 101.1 vs. 100.5 forecast, 99.7 previous
  • U.K. Retail Sales m/m: 1.6% vs. 0.4% forecast, 1.0% previous; core m/m at 1.7% vs. 0.3% forecast, 1.0% previous

A busy morning for forex traders in the morning London session with moves from the SNB and positive U.K. retail sales.

The main story of the morning is the Swiss National Bank’s decision to defend the currency cap by dropping the libor rate to -0.25%. This is exactly what Swiss franc bears have been waiting for as the reaction was a swift sell off in all franc pairs on the news. It’s been the focus of the Swiss National Bank to defend the 1.2000 handle on EUR/CHF, which it clearly did as the pair shot up as high as 1.2095 on the news. The pair has fallen back as low as 1.2032, but there may still be downward pressure on the franc as U.S. traders get a chance to price in the news.

This may actually be having a negative effect on the euro as well as traders see a cut from the SNB as a precursor to more stimulus expansion by the ECB in 2015.  Despite positive sentiment from German IFO data this morning, the euro is trending lower on the session against the majors:

EUR/USD is down 47 pips (-0.39%) to 1.2292, EUR/JPY is down 28 pips (-0.19%) to 146.08, and EUR/GBP is down 57 pips (-0.72%) to .7865

Sterling is getting a boost in volatility, not only on the positive risk sentiment vibes sparked by yesterday’s FOMC meeting, but also on positive retail sales.  The British pound is up on the session against most of the majors:

GBP/USD is up 53 pips (+0.34%) to 1.5625, GBP/JPY  is up 93 pips (+0.51%) to 185.67, and GBP/CHF is up 170 pips (+1.13%) to 1.5322

The forex calendar for the Thursday afternoon London/morning U.S. session looks to be much calmer with only a few economic reads from the U.S.

At 1:30 pm GMT, we’ll get the weekly U.S. initial jobless claims data, and at 3:00 pm GMT we’ll see the Philadelphia Fed Survey and U.S. leading indicator data. The potential market mover among the bunch is the Philly Fed Survey, forecasted to come in at 26 vs. 40.8 previous.  That previous number of 40.8 was a huge spike higher from the trend, so it’ll be interesting if we see a return to the trend and if there is a reaction to the number.

Besides the U.S. data, currency moves may continue to be influenced by the recent central bank events, the shift back to positive sentiment, and future central bank outlooks.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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