London Session Forex Recap – Feb. 5, 2015

  • German Factory Orders (sa) m/m: 4.2% vs. 1.5% forecast, -2.4% previous
  • U.K. Halifax House Price Index m/m: 2.0% vs. 1.1% previous
  • Bank of England holds main interest rate at 0.5%, Asset Purchase Facility at 375B GBP
  • U.S. Challenger Job Cuts: 17.6% vs. 6.6% previous

The euro bounces back from yesterday’s drop on news that the European Central Bank bans Greek bonds as acceptable collateral for lending, likely sparked by the positive German factory orders number in the morning London session. On the Greek bond news, EUR/USD dropped to nearly 1.1300 during the Asia trading session, but lifted to as high as 1.1450 on the German data, gaining back most of the session losses. The upward momentum seems to have slowed and faded for the euro, which remains mostly lower against the majors on the session:

EUR/USD is down 10 pips (-0.09%) to 1.1332, EUR/JPY is down 89 pips (-0.79%) to 134.30, and EUR/GBP is down 24 pips (-0.33%) to .7542

The British pound also saw a boost in volatility, likely on the positive Halifax housing data and ahead of the Bank of England monetary policy decision to hold off policy changes as expected, likely due to the fall in inflation.  This bucked the trend of other central banks lowering interest rates as of late, putting the BOE on a divergent path to the ECB, Bank of Canada, and Reserve Bank of Australia.  Of course, we won’t fully know what the members were thinking until the meeting minutes are released later in the month, but for now it looks all positive for Sterling, which is also bouncing back after a downside move during the Asia session:

GBP/USD is up 8 pips (+0.05%) to 1.5186, GBP/CAD is up 95 pips (+0.51%) to 1.8921, and GBP/CHF is up 33 pips (+0.24%) to 1.4037

Overall, forex price action was choppy, but risk sentiment bounced back towards risk taking after a broad pullback in risk thanks to the Greek bond ban and news of the People’s Bank of China cutting the bank reserve ratio (from 20.0% to 19.5%). Yen pairs are nearly back to Wednesday’s closing levels and beyond.

GBP/JPY is up 137 pips (+0.78%) to 179.42, USD/JPY is up 25 pips (+0.22%) to 117.49, and NZD/JPY is up 61 pips (+0.72%) to 86.91

The forex calendar for the Thursday afternoon London/morning U.S. session has a small mix of U.S. and Canadian data to hopefully shake things up.

At 1:30 pm GMT, we’ll get trade data from both the U.S. (-$38B forecast vs. -$39B previous) and Canada (-1.1B CAD forecast vs. -0.64B CAD previous), as well as the U.S. weekly jobless claims (290K forecast vs. 265K previous). These are mid-tier events that aren’t likely to cause a big stir in the forex markets without big surprises, but worth paying attention to in case we do see a pickup in volatility.

With no major economic releases beyond this hour, the focus will likely remain on Greece developments, global inflation and growth concerns, and tomorrow’s U.S. employment report. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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