London Session Forex Recap – May 13, 2015

  • German CPI (final) m/m: 0.0% vs. -0.1% forecast/previous
  • German Prelim GDP q/q: 0.3% vs. 0.5% forecast, 0.7% previous
  • U.K. Claimant Count Change m/m: -12.6K vs. -20.0K forecast, -20.7K previous
  • U.K. Unemployment Rate m/m: 5.5% vs. 5.5% forecast, 5.6% previous
  • European Industrial Production m/m: -0.3% vs. 0.0% forecast, 1.1% previous
  • Bank of England releases their quarterly Inflation Report; lowered growth forecasts and pushed back rate hike expectations

Forex traders went to high-yielders in the morning London session, as the commodity dollars stage a strong rally right from the London open.  After taking a broad hit during Asia trade, likely on the weak Chinese data, European traders went straight to the buy button.  This could possibly be on the RBNZ’s focus to cool the Auckland housing market (increasing the required down payment for a mortgage), removal of easing bias by the RBNZ, or capital flows away from the euro after the euro zone printed a broad set of economic data this morning. Whatever the case may be, the Aussie, Kiwi, and the Loonie are all up on the session against the rest of the majors, especially against the euro:

EUR/AUD is down 102 pips (-0.73%) to 1.3953, EUR/NZD is down 160 pips (-1.04%) to 1.5060, and EUR/CAD is down 36 pips (-0.28%) to 1.3437

The British pound took a tumble on the session.  First, it was a nice bounce higher after the U.K. unemployment data came in mixed, but it the reaction was bullish for the pound as traders likely focused on the improvement in the average earnings number.  This data point is important because as averages earnings rise, there is potential for more spending and inflation to rise.

But it all came crashing down after the release of the Bank of England inflation report, where BOE Governor Carney cuts 2015 growth forecasts to 2.5% (2.9% previous) and hints that the first rate rise may take place in the second quarter of next year.  Sterling traders quickly went into bear mode on the idea of a rate hike coming next year, especially against the aforementioned comdolls strength:

GBP/AUD is down 183 pips (-0.98%) to 1.9450, GBP/CAD is down 91 pips (-0.48%) to 1.8731, and GBP/NZD is down 299 pips (-1.37%) to 2.0984

The forex calendar for the Wednesday afternoon London/morning U.S. session is very light on economic data points, but fortunately for short-term traders, heavy on potential for creating volatility in the Greenback.

At 1:30 pm GMT, we’ll get the monthly read on U.S. retail sales, an important read given how the U.S. is a consumer driven economy.  The forecast for the headline number is for a 0.2% gain m/m vs. a 0.9% gain in the previous month; the core number is forecasted to tick higher to 0.5% vs. 0.4% previous.  This is the main potential market mover for the morning U.S. session, so get those USD orders ready for short-term volatility, especially if we see a break from the recent trend of weaker-than-expected reads.

At 3:00 pm GMT, we’ll get the monthly U.S. business inventories numbers, forecasted to tick lower to 0.2% vs. 0.3% previous. This can be a leading indicator of future spending activity because as wholesalers and manufacturers lose inventory, that tends to prompt them to spend again to resupply. This is a mid-tier event so don’t expect a reaction with a big surprise, but it’s definitely a number to factor in to the overall broad economic picture of the U.S. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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