London Session Forex Recap – Jan. 22, 2015

  • U.K. Public Borrowing (PSNB ex interventions): 13.1B GBP vs. 9.7B GBP forecast, 12.4B GBP previous
  • U.K. CBI Industrial Trends: 4% vs. 5% forecast/previous
  • European Central Bank leaves key rate at 0.05%; Press conference at 1:3o pm GMT

Forex volatility was understandably light in the morning London session, typical behavior ahead of major central bank announcements.  And volatility remains tight after the European Central Bank announced no changes to key interest rates (main rate stays at 0.05%, deposit rate at -0.2%) and states that “further measures to be announced later.”  We assume that announcement will take place at the ECB press conference (scheduled for 1:30 pm GMT), where the market is expecting to hear about new quantitative easing measures from the ECB.

The forecast is for the ECB to propose a 50B EUR per month QE program through 2016, so if we see anything besides that, expect big fireworks for the entire currency market, not just the euro.

Outside of the euro, we did see broad weakness in the US dollar, possibly on profit taking from its recent strength ahead of the ECB event, but there doesn’t seem to be a direct catalyst for the London session weakness.  The Greenback remains slightly lower heading into U.S. trade:

USD/JPY is down 31 pips (-0.27%) to 117.62, USD/CHF is down 38 pips (-0.44%) to .8545, and EUR/USD is up 17 pips (+0.15%) to 1.1626

The forex calendar for the Thursday afternoon London/morning U.S. session is light, but we may continue to see volatility as the ECB will likely continue to be the focus.

At 1:30 pm GMT, we’ll get the weekly U.S. initial jobless claims with a forecast of 300K new claims vs. 316K.  This is a mid-tier event that likely won’t get much coverage as forex traders will be focused on the ECB press conference schedule to start at this time.

To close out the calendar for the Thursday session, we’ll get the U.S. FHFA  house price index (0.3% forecast vs. 0.6% previous) at 2:00 pm GMT and the European flash consumer sentiment read (-10.5 forecast vs. -10.9 previous) at 3:00 pm GMT.  Both are low-to-mid tier events, so it’s likely they won’t spark big moves in currencies without a huge outlier number.

And besides, the ECB press conference will likely remain influential through the rest of the Thursday session unless we get another huge surprise–but with the way things have been going with central banks lately, would another unexpected CB even really be a surprise?  Now is definitely the time to trade safe and stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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