London Session Forex Recap – Jan. 7, 2015

  • U.K. BRC Shop Price Index y/y: -1.7% vs. -1.8% forecast, -1.9% previous
  • German Retail Sales m/m: 1.0% vs. 0.2% forecast, 2.0% previous
  • German Unemployment Rate: 6.5% vs. 6.6% forecast/previous
  • European Flash HICP y/y: -0.2% vs. 0.3% previous; Core at 0.8% vs. 0.7% previous

It’s another tough day for the euro in today’s morning London session, as one of the main headlines from today’s morning trade is the continued drop in consumer prices in Europe. The yearly read came in far below the previous read at -0.2%, and given that the core read ticked higher, it’s pretty obvious that the drop in energy prices is the main culprit for the broad drop.

With consumer prices continuing its drop, this puts more pressure on the ECB to act on quantitative easing soon rather than later; remember that its main mandate is price stability with a target inflation rate of 2.0%. The euro fell right on the release of the inflation data, and remains lower across the board on the session:

EUR/USD is down 62 pips (-0.52%) to 1.1829, EUR/GBP is down 25 pips (-0.33%) to .7818, and EUR/CAD is down 78 pips (-0.56%) to 1.3988

Outside of the euro, currency price action seems to be choppy without other major catalysts.  The one exception may be the Japanese yen, which is selling on the session with out a direct catalyst.

USD/JPY is up 108 pips (+0.91%) to 119.48, EUR/JPY is up 56 pips (+0.40%) to 141.30, and GBP/JPY is up 117 pips (+0.67%) to 180.53

The forex calendar for the Wednesday afternoon London/morning U.S. session should help volatility pick up with mid-tier events from the U.S. and Canada.

We just saw the release of the ADP Employment Survey, which is a look at the U.S. employment sector through private payrolls data. It came in at 241K vs. 227K previous (revised up from 119K), and the initial reaction seems to be bullish for Greenback so far.

At 1:30 pm GMT, we’ll get U.S. trade balance data (-$42B forecast vs -$43.4B previous) and Canadian merchandise trade data (-C$200M forecast vs. +C$100M previous).  Both are mid-tier events that could spark some movement, but it may be short lived.

At 3:00 pm GMT, we’ll get Ivey PMI data for a read on the manufacturing sector in Canada.  The forecast is for the index to come in lower at 53 vs. 56.9 previous. This could open up the Loonie to more of the bearish sentiment it’s been seeing lately.

And finally, the Federal Reserve will release the minutes from the Dec. 16 – 17 FOMC meeting.  We may see insight on if/when the Fed may raise interest rates in the U.S. and the pace of tightening. Current speculation seems to be sometime in mid-2015 for a hike, so any hints of change before or after should set off a quick lift in volatility for all financial markets. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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