London Session Forex Recap – May 5, 2015

  • Spanish Unemployment Change: -118.9K vs. -65.1K forecast, -60.2K previous
  • U.K. Construction PMI: 54.2 vs. 57.4 forecast, 57.8 previous
  • European PPI m/m: 0.2% vs. 0.3% forecast, 0.5% previous; y/y at -2.3% vs. -2.3% forecast, -2.8% previous

Forex price action was all over the place thanks to fresh European region data and Asia catalysts carrying over to the morning London session.

Starting with the comdolls, we saw the Aussie pullback from its surprising spike higher after the RBA interest rate cut and the Kiwi move in to the red, possibly on recent weak Chinese economic data and expectations that the Chinese economy will remain under pressure (China is a big trading partner for both Australia and New Zealand).  After hitting highs just under .7920, AUD/USD has pulled back below .7900 and currently trading around .7870.  NZD/USD is under strong selling pressure since hitting highs around .7550 in Asia, now trading at .7490 with strong downside momentum.  China’s weakness may also be a contributor to the broad sell off in the Japanese yen on the session:

USD/JPY is up 36 pips (+0.30%) to 120.48, GBP/JPY is up 53 pips (+0.30%) to 182.12, and AUD/JPY is up 70 pips (+0.74%) to 94.83

From the European region, we saw the euro take back some of its Asia session losses, possibly on the strong positive reading from the Spanish unemployment data but likely limited by comments from European commissioner Pierre Moscovici who says negotiation progress with Greece is still “too slow.”  Overall, the euro is in the red with exception to the Kiwi and yen, and its London session strength is likely the reason why we’re seeing some broad strength in the Swiss franc (the euro and franc have a strong positive correlation due to their proximity and trade relationship).

EUR/CHF is down 29 pips (-0.28%) to 1.0377, NZD/CHF is down 29 pips (-0.41%) to .7498, and USD/CHF is down only 2 pips (-0.02%) to .9335 after hitting highs around .9410 earlier.

Finally, the British pound is holding its own on the session, holding off momentary weakness sparked by the weaker-than-expected construction PMI data.  Sterling pairs are trading near Tuesday session open prices, with exception to the big movers of the session in the comdolls and the yen:

GBP/USD is up 60 pips (+0.33%) to 182.18, GBP/AUD is down 77 pips (-0.40%) to 1.9212, and GBP/NZD is up 112 pips (+0.56%) to 2.0164

The forex calendar for the Tuesday afternoon London/morning U.S. session is once again light on data, but we’ve got quite a few data points with market moving capability.

At 1:30 pm GMT, we’ll get the trade balance from the U.S. (-$41.3B forecast vs. -$35.4B previous) and Canada (-C$850M forecast vs. -C$980M previous).  Both are mid-to-top tier events for both the Loonie and the Greenback, so if we see actual numbers very different from forecasts and/or previous, expect volatility to pick up short-term. Also, the U.S. trade balance has been improving since January while the Canadian data has been on a downslide, so if we send trend breaks, that should also give the market a nice kick in volatility.

We’ll wrap up the U.S. session data with the IBD consumer optimism (50 forecast vs. 51.3 previous and ISM non-manufacturing index number at 3:00 pm GMT.  The ISM non-manufacturing number is based on surveys from more than 400 non-manufacturing executives, and the likely market mover between the two data points.  The forecast is for a tick lower to 56.2 vs. 56.5 previous, which would keep it in its recent data range around 56.0.

Finally, early in the Wednesday Asia session, we’ll get the quarterly New Zealand employment data with a forecast of 0.8% growth vs. 1.2% previous.  Employment data is always a big potential market mover, and since this data does come out less frequent that the other majors, it does tend to spark a strong reaction from Asia session forex traders.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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