London Session Forex Recap – Feb. 20, 2015

  • German PPI m/m: -0.6% vs. -0.4% forecast, -0.7% previous
  • German Flash Services PMI: 55.5 vs. 54.4 forecast, 54 previous; Manufacturing PMI at 50.9 vs. 51.5 forecast, 50.9 previous
  • European Flash Services PMI: 53.9 vs. 53 forecast, 52.7 previous; Manufacturing PMI at 51.1 vs. 51.5 forecast, 51 previous
  • U.K. Retail Sales m/m: -0.3% vs. -0.2% forecast, 0.2% previous; Core Retail Sales at -0.7% vs. -0.3% forecast, -0.1% previous
  • U.K. Public Borrowing (PSNB ex banks): -8.8B GBP vs. -9B GBP forecast, 10.5B GBP previous

Sterling takes a dive right from the start of the morning London trading session with word the street pointing to comments from BOE Monetary Policy Committee member Ian Mcafferty that rates could potentially turn negative, citing potential risks like a stronger pound and an unbalanced recovery.

The move lower in Sterling was given one last boost thanks to weaker-than-expected retail sales data, both in the headline and core numbers, and a negative read on public sector borrowing data. But with so much pressure already placed on the British pound, the reaction to the economic data wasn’t a big one.  Overall the pound is lower on the session with several pound pairs showing no signs of slowing to the downside:

GBP/USD is down 40 pips (-0.26%) to 1.5367, GBP/JPY is down 107 pips (-0.59%) to 182.23, and GBP/AUD is down a big 184 pips (-0.93%) to 1.9594

The euro is also feeling pain in the London session with not only mixed but generally lower flash PMI data, but of course the Greek bailout negotiations still ongoing and uncertain of the outcome. The latest development seems to be that the rest of Europe and Greece will go at it in Brussels one more time before the weekend and that a deal was close, but until it’s all official I wouldn’t breathe a sigh of relief yet. Much like the pound, the euro’s drop also looks like momentum isn’t slowing down going into the U.S. trading session:

EUR/USD is down 58pips (-0.51%) to 1.1308, EUR/JPY is down 115 pips (-0.87%) to 134.02, and EUR/AUD is down 176 pips (-1.21%) to 1.4411

The forex calendar for the Friday afternoon London/morning U.S. session is light but we have a big potential market mover coming out for the Loonie.

At 1:30 pm GMT, we’ll get the Canadian retail sales data with the headline forecast at -0.4% vs. 0.4% previous and the core retail sales number forecast to come in at -0.8% vs. 0.7% previous. If the actual numbers and reaction are similar to the U.K.’s retail sales data, the we could see a short-term pressure in the Loonie to give back some of its day’s gains.

And to close out the economic calendar for the week, at 2:45 pm GMT, we’ll get the U.S. flash manufacturing PMI data, forecast to come in at 53.6 vs. 53.9 previous.  This is a low tier economic event, so it’s likely it won’t cause much of a stir in the markets, especially with a strong focus on the euro and pound weakness from this morning’s trade and the developing negotiations in Greece. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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