London Session Forex Recap – Jan. 13, 2015

  • German Wholesale Price Index y/y: -2.3% vs. -1.1% previous
  • U.K. CPI y/y: 0.5% vs. 0.7% forecast, 1.0% previous

U.K. inflation data came in lower than both the forecast and previous numbers, its lowest levels since May 2000. The likely influences on the drop was the crash in oil and gas prices this year, but we’re also seeing a drop in food prices thanks to competition and falling commodity prices.

Sterling initially fell ahead of and on the news, but the earlier drop was faded in no time, likely on comments from BOE officials that they weren’t worried about inflation, and that they ruled out more QE at this time.  We’re seeing British pound pairs get back to even, with some even hitting session highs:

GBP/USD is breakeven at 1.5170, GBP/JPY is up 32 pips (+0.17%) to 179.83, EUR/GBP is down 26 pips (-0.34%) to .7770

Price action around the rest of the currency market seems to be choppy, but we are seeing broad euro weakness, possibly on the weak German wholesale price index data, or the continuing weak sentiment based on Greek exit worries and the potential quantitative easing program from the European Central Bank.

EUR/USD is down 47 pips (-0.40%) to 1.1784, EUR/JPY is down 20 pips (-0.15%) to 139.81, and EUR/AUD is down 49 pips (-0.33%) to 1.4456

The forex calendar for the Tuesday afternoon London/morning U.S. session is light, with only a couple of mid-tier U.S. events to look out for. At 3:00 pm GMT, we’ll get the IBD consumer optimism survey number (48.7 forecast vs. 48.4 previous) and at 7:00 pm GMT, we’ll get a read on the monthly U.S. government budget ($3B forecast vs. -$56.8B previous).  Again, both are mid-tier events that won’t likely spark much reaction, but it’s good to be aware of them in case we see a surprise.

Without big market data look for the forex markets to be influenced by the equity and bond markets, as well a continued focus on the drop in oil prices, which is now below $45/barrel. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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