London Session Forex Recap – Jan. 14, 2015

  • French HICP m/m: 0.1% vs. -0.2% previous; y/y at 01% vs. 0.4% previous
  • European Industrial Production m/m: 0.2% vs. 0.3% previous; y/y at -0.4% vs. -0.7% forecast, 0.8% previous
  • ECJ say the ECB’s OMT program appears to be legal

Thanks to continued signs of a slowing global economy (weaker inflation, commodity demand) and a downgrade of the global outlook for 2015 and 2016 by the World Bank, we saw the typical risk-off, safe haven moves in the currency markets through the Wednesday session.

The Japanese yen rallied and commodity currencies fell through the Asia session, but we saw a little bit of stability during the London session.  This is possibly due to the European Union Court of Justice’s statement that the ECB’s OMT program appears to be legal, which opens up more doors for a potential ECB quantitative easing program.

With the idea that more help may be on the way for the global economy in the form of easy money, it looks like fear flows have waned, and we even saw a bounce higher in the comdolls. After a drop down to .8070 on falling copper prices, AUD/USD rebounded to around .8140 in European trade. The USD/JPY bottomed out around 116.60 before rebounding back to the 117.00 to be down -0.8% on the session, and down from the 119.20 Monday high.

And of course, with a higher probability of QE coming, the euro took a hit against the non-comdoll currencies:

EUR/USD is down 20 pips (-0.18%) to 1.1749, EUR/GBP is down 21 pips (-0.28%) to .7742, and EUR/JPY is down 130 pips (-0.94%) to 137.49

The forex calendar for the Wednesday afternoon London/morning U.S. session is packed with U.S. data to keep the action going in currencies.

At 1:30 pm GMT, we’ll get U.S. retail sales and the monthly import price index data (-2.7% forecast vs. -1.5% previous). The potential market mover of the pair is the U.S. retail sales data, with the headline number forecasted to tick higher to vs. 0.7% previous, and the core number forecasted to tick lower to % vs. 0.5% previous. Volatility for the Greenback does tend to pick up for this event, but it’s usually short-lived.

At 3:00 pm GMT, we’ll get the U.S. business inventories, which is forecasted to tick slightly lower to 0.2% from 0.3%. This is a mid-tier data point which is likely to not garner much attention unless we see a very big surprise vs. forecast/previous.  So, the current risk-off fears we saw through Asia and European may continue to be the drivers as U.S. traders get to price in this morning’s news and sentiment. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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