London Session Forex Recap – Apr. 14, 2015

  • German Wholesale Price Index m/m: 1.0% vs. 0.5% previous
  • U.K. CPI y/y inline with 0.0% forecast/previous; m/m at 0.2% vs. 0.2% forecast, 0.3% previous
  • U.K. Input Prices m/m: 0.3% vs. -0.4% forecast, 0.1% previous
  • U.K. ONS House Prices: 7.2% vs. 8.4% previous
  • European Industrial Production m/m: 1.1% vs. 0.4% forecast, -0.3% previous; y/y at 1.6% vs. 0.8% forecast, 0.4% previous

The morning London session saw more action than Bieber gettin’ the boot at Coachella, thanks to a heavy forex calendar and commentary out of Japan.

First, we’ve got the Japanese yen quickly giving back earlier session gains that were sparked by comments from the Japanese Prime Minister’s economic advisor, Koichi Hamada. Earlier he said that yen at 105.00 was appropriate given purchasing power parity, which forex traders quickly took that as a signal to buy more yen.  Now that his comments have been processed in the minds of currency traders with the understanding it doesn’t necessarily mean that’s where Japanese officials wanna see it go, the market was quick to turn after later said in an interview that USD/JPY at 120 is “acceptable.”

After falling to session lows around 119.55, USD/JPY quickly climbed higher to 120.10 on the Hamada’s clarification comments, and now trading around 119.85 (down 21 pips or -0.18% on the session).

UK inflation was the main event from the European region, with the annualized read staying at 0.0% as expected and inline with the previous read; the monthly read increased by 0.2% but lower than the 0.3% rise in February. Weak inflation readings are obviously a disappointment to Sterling bulls as this weakens the argument for a rate hike by the BOE. The British pound fell broadly on the news, but has since bounced to keep the bulls not too deep in the red:

GBP/USD is down 15 pips (-0.11%) to 1.4655, GBP/JPY is down 49 pips (-0.26%) to 175.75, and GBP/CHF is down only 7 pips (-0.06%) to 1.4337

And the euro saw demand right from the start of the London session, likely on the positive German wholesale price index news (first positive read since October), and saw one last push higher thanks to the European industrial production data at 10:00 am GMT.  The shared currency has pulled back since, but remains mostly higher on the session against most of the majors:

EUR/USD is up 6 pips (+0.07%) to 1.0571, EUR/GBP is up 21 pips (+0.30%) to .7218, and EUR/JPY has not yet recovered from the Japanese yen rally, still down 12 pips (-0.09%) to 126.76 on the session.

The forex calendar for the Tuesday afternoon London/morning U.S. session is likely to keep the fast and furious action going with top tier economic data coming from the U.S.

At 1:30 pm, we’ll get the heavy hitting data points in the form of U.S. producer price index (0.2% forecast vs. -0.5% previous) and retail sales data (headline 1.1% forecast vs. -0.6% previous). Both are top tier events as producer prices are a component of broad inflation measurement and retail sales is directly related to consumer spending (the largest component of U.S. GDP measurements). The does tend to move on these data points, but unless we see’em saying the same thing about the U.S. economy, the U.S. dollar could be in for a bumpy ride.

At 3:00 pm GMT, we’ll head into the end of the London trading session with another potential catalyst from the U.S, the monthly business inventories data. A lower number is considered a positive for the Greenback because if inventories are low, then it’s assumed that U.S. companies will have to start spending again to get their inventories back up.  This is a mid-tier event with a trend of improving data, so unless we see a surprise rise in inventories, it’s likely the volatility won’t be long lasting. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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