London Session Forex Recap – May 7, 2015

  • Swiss SECO Consumer Confidence Index: -6 vs. -11 forecast, -6 previous
  • German Factory Orders m/m: 0.9% vs. 1.5% forecast, -0.9% previous
  • French Trade Balance: -€4.58B vs.-€3.6B forecast, -€3.62B previous
  • French Industrial Production m/m: -0.3% vs. 0.1% forecast, 0.5% previous
  • French Manufacturing Production m/m: 0.3% vs. 0.2% forecast, 0.5% previous

Forex traders stepped up the volatility in the morning London session, and it looks like risk aversion is the name of the game with the long list of global market concerns putting the markets on edge.

What isn’t concerning the markets nowadays? Whether it’s the recent stream of weak jobs data from Australia and New Zealand, today’s weak euro zone industrial data or continued Greek debt uncertainty, a weak outlook for China’s economy and stock market, or the global bond market rout sparked by the likely interest rate hike in the U.S., fears are starting to build and prompting traders to lighten up on risk assets. With no direct major catalysts that I can see, I think this broad picture is the likely reason we’re seeing flows into the safe haven currencies and weakness from the high-yielders like the Aussie and Kiwi.

The Swiss franc seems to be the biggest benefactor with recent weak USD sentiment still in play (last week the Fed confuses rate hike expectations) and the continued underlying selling pressure on the yen due to the Bank of Japan’s huge quantitative easing program.  Swiss franc pairs have been sliding since before the London open with momentum still in favor of the bears:

USD/CHF is down 52 pips (-0.58%) to .9104, EUR/CHF is down 79 pips (-0.76%) to 1.0310, and AUD/CHF down 64 pips (-0.88%) to .7232

On the other end of the spectrum, the Kiwi’s losses on this week’s weak employment data and Chinese weakness (they are big time trading partners) seems to have accelerated during the London session to make it the big loser on the day, especially against the aforementioned bullish sentiment for the safe havens.

NZD/USD is down 31 pips (-0.42%) to .7461, NZD/JPY is down 62 pips (-0.70%) to 88.89, and NZD/CHF is down 74 pips (-1.10%) to .6788

One final thing to note is that it is Parliament election day for the U.K. While the reaction to the election results for Sterling isn’t clear with such a tight race, it is an event that all pound traders should be aware of with the ability to kick up volatility up when the polls close at 10 pm U.K. time. For now, British pound pairs are moving on their counter currency influences but seem to be trading in tighter ranges than it normally would with so many catalysts moving the markets.

GBP/USD is down only 17 pips (-0.11%) to 1.5227, GBP/JPY is down 66 pips (-0.37%) to 181.39, and GBP/NZD is up 70 pips (+0.34%)

The forex calendar for the Thursday afternoon London/morning U.S. session is laced with mid-tier events from the U.S. and Canada which aren’t likely to add or take away from the current risk sentiment focus.

At 1:30 pm GMT, we’ll get U.S. initial weekly jobless claims data (279K forecast vs. 262K previous) and Canadian building permits data (2.0% forecast vs. -0.9% previous).  U.S. initial claims has been generally positive in 2015 by holding below the 300K level, so we could see a bit more U.S. support if today’s number follow that data trend.

As for Canadian building permits, the data has been more negative than positive since the beginning of the year, so a positive read may give support to the Loonie which has been feeling the pain with the rest of the comdolls on the session.

At 8:00 pm GMT, we’ll get the U.S. consumer credit for a read on borrowing demand in the U.S., and therefore a potential indicator for future retail spending.  The forecast is for it to tick only slightly higher to $15.8B vs. the previous read of $15.52B, but would still be a strong improvement over February’s low number of $11.6B.

Outside of the economic calendar, pay attention to the equity markets which have been broadly lower across the globe (Shanghai composite -2.75% and FTSE 100 -1.22%) for more risk sentiment cues to potentially influence currency bias. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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