London Session Forex Recap – May 11, 2015

  • Bank of England holds base rate at 0.5% and asset purchase program at £357B/month as expected

The only note worthy event to start the trading week in Europe was the Bank of England monetary policy decision, holding the official bank rate and asset purchase program as expected.  There is no follow up statement from the BOE as usual, so we’ll have to wait for a couple of weeks for the meeting minutes to get an update on what the BOE is seeing and how they think the results of last week’s U.K. Parliamentary elections may influence the economy. The British pound was in rally mode all morning, likely a continuation of the rally sparked by the reduction of uncertainty as to who will run the U.K. government. Overall, the pound is higher on the session with momentum still strong going into U.S. trade:

GBP/USD is up 56 pips (+0.36%) to 1.5492, GBP/JPY is up 96 pips (+0.52%) to 185.78, and GBP/CHF is up 90 pips (+0.62%) to 1.4464

The euro was under pressure in London trade, and with no major economic catalysts, it’s logical to assume that sellers are taking action ahead of the potential for Greece to miss the next debt payment of $856.6M due to the International Monetary Fund due on Tuesday. There is also the fear that Greece has no Plan A or Plan B on getting out of their debt debacle. Whatever the driver may be, the euro is down on the session with exception to the Kiwi, which is getting hammered across the board:

EUR/USD is down 67 pips (-0.60%) to 1.1141, EUR/JPY is down 55 pips (-0.42%) to 133.63, and EUR/CHF is down 35 pips (-0.37%) to 1.0398

I think the last forex development of note is the continued weakness in the Kiwi, taking a hit since the week open and continuing through the morning London session.  There were no direct catalysts, so it’s safe to say that the bearish reaction to last week’s weak jobs data and a potentially dovish statement from the upcoming RBNZ Financial Stability report is what is pushing forex traders to continue hit the sell button.

NZD/USD is down 114 pips (-1.53%) to .7374, NZD/JPY is down 122 pips (-1.37%) to 88.46, and the biggest gainer of the day, GBP/NZD up a big 399 pips (+1.94%) to 2.0995

It’s another one of those Monday’s where the forex calendar for the afternoon London/morning U.S. session has little to trade on and likely to be tough for short-term forex traders.

At 3:00 pm GMT, we’ll get a fresh read on employment conditions from the U.S. in the form of the Labor Market Conditions index.  This is a relatively new metric to measure employment conditions developed by the Fed where, based on the data, the weight given to the various 19 indicators tracked is changed.  This has yet show its ability to influence market behavior, but being an indicator developed and used by the Fed to measure the jobs market, it’s definitely one to watch.

With no top tier events to look out for, it’s likely the morning London trends will remain in focus and we’ll get directional cues from broad risk sentiment.  So, pay attention to what the equity and bond markets (so far mixed with Nikkei 225 +1.25%, EURO STOXX 50 -0.62%) are doing as we start the new trading week for influences on currency direction.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together.

In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis. Head on to Big Pippin’s Daily Chart Art for some pip-locking technical setups!