London Session Forex Recap – May 15, 2015

  • Swiss PPI m/m: -2.1% actual v.s. -0.1% expected, 0.2% previous
  • U.K. Construction Output m/m: 3.9% actual v.s. 4.1% expected, -0.3% previous

Despite a relatively empty forex calendar, today’s morning London session was very interesting, with two safe haven currencies in the spotlight: the Swissy and the Greenback. The Swissy was bleeding across the board while the Greenback solidified its comeback after a week of weakness. Fun with puns!

Let’s start with the Swiss franc. The Swissy started to lose ground when the Swiss producer price index (PPI) came in lower-than-expected–much, much lower! The PPI acts as a leading indicator for consumer inflation, and inflation is a key metric for how central banks adjust monetary policies. And looking at the historical data, Swiss PPI has generally been close to zero, so a -2.1% read was significant enough to cause the Swissy to bleed-out for the rest of the session.

USD/CHF is up by 85 pips (+0.94%) to 0.9201, GBP/CHF is up by 84 pips (+0.58%) to 1.4469, EUR/CHF is up by 47 pips (+0.45%) to 1.0453

The other currency move of note is the Greenback.  Without a catalyst, the rally is likely forex traders taking back some of its USD losses after being hammered all week long (i.e., some profit taking ahead of the fast approaching weekend).  We’ve also got a slew of U.S. data coming up quickly that may reverse recent weak sentiment sparked by this week’s weak U.S. retail sales data:

USD/JPY is up by 42 pips (+0.35%) to 119.83, USD/CAD is up by 38 pips (+0.32%) to 1.2025, EUR/USD is down by 56 pips (-0.50%) to 1.1352

As for other currencies, the euro, the pound, the Loonie, and Kiwi were mostly mixed for the session. The only currency worth noting among the comdolls is the Aussie,  which has been slightly weak for most of the session probably due to Chinese Premier Li Keqiang’s statement that authorities “must take more forceful measures to consolidate the improvement trend and withstand downwards pressure.” This was probably taken by some traders to mean more stimulus is on the way and that Chinese demand for Australian commodities isn’t going to pick up anytime soon.

AUD/USD is down by 33 pips (-0.39%) to 0.8005, AUD/CAD is down by 21 pips (-0.21%) to 0.9630, AUD/NZD is down by 17 pips (-0.17%) to 1.0760

The upcoming U.S. session’s forex calendar is expected to inject a welcome burst of volatility to close out the week strong with top-tier and mid-tier data on tap.

Canadian manufacturing sales (1.2% expected, -1.7% previous), Canadian foreign securities purchases (7.23B expected, 9.27 previous), and the U.S. Empire State manufacturing index (5.1 expected, -1.2 previous) are set for release at 1:30 pm GMT.  Forex traders may want to watch out for Canadian manufacturing sales since it tends to move the markets. Even more so today, since the reading is expected to show an improvement after two months of disappointments.

Traders may also want to keep an eye on the Empire State manufacturing index, which is a survey of about 200 manufacturers in New York state and is a leading indicator of business activity and the overall economy. It may potentially cause some volatility in Greenback pairs since the previous read dipped into negative territory while the expected read is expected to pop back up. If the actual reading is worse than expected, then we may see some weakness in the Greenback.

Moving on, the U.S. capacity utilization rate (78.4% expected, 78.4% previous) and U.S. industrial production (0.1% expected, -0.6% previous) are coming out at 2:15 pm GMT. Both are mid-tier data points from the Federal Reserve, but capacity utilization rate probably has a higher chance for moving the markets since it is expected to remain flat. So a better-than-expected read may cause more dollar bulls to come in while a disappointing read may cause dollar bears to attack.

Finally, at 3:00 pm GMT, forex traders will get the U.S. consumer sentiment (95.8 expected, 95.9 previous) and the U.S. consumer expectations (88.6 expected, 88.8 previous) from the University of Michigan. Both are leading indicators for consumer spending. And consumer spending is important because it contributes heavily to the U.S. economy. Regarding expectations, both are expected to deteriorate slightly, so better than expected reads may cause the U.S. dollar to further extend its gains. And on that note, stay frosty!