London Session Forex Recap – May 22, 2015

  • German Final GDP q/q: 0.3% actual v.s. 0.3% expected, 0.3% previous
  • German Final GDP y/y: 1.0% actual v.s. 1.0% expected, 1.1% previous
  • French INSEE Manufacturing Confidence: 103 actual v.s. 101 expected, 102 previous
  • German IFO Business Climate: 108.5 actual v.s. 108.3 expected, 108.6 previous
  • German IFO Current Conditions: 114.3 actual v.s. 113.5 expected, 114.0 previous
  • German IFO Expectations as expected at 103 v.s. 103.4 previous
  • U.K. Public Sector Net Borrowing: 6.8B actual v.s. 8.3B expected, 6.8B previous

What a way to end the week! There was a lot of volatility during the morning London session, with almost all currency pairs on the move.

There wasn’t really any catalyst to account for their weakness during the session, but Aussie and the Kiwi were both broadly lower with AUD/USD down by 39 pips (-0.49%) to 0.7886 and NZD/USD down by 20 pips (-0.28%) to 0.7361. The Swissy, meanwhile, was making gains with USD/CHF up by 24 pips (+0.27%) to 0.9312 for the session. And like the Aussie and the Kiwi, there wasn’t really any catalyst to account for the move. It is possible that euro strength is giving the Swissy a boost due to their close trade relations and the Swissy being more favorable thanks to its safe haven status.

After a week of being beaten down by the other currencies, the euro finally managed to show strength with some euro pairs posting higher highs on the daily chart. The most likely catalysts were the German Ifo survey results whose readings were mostly better-than-expected (although German IFO business climate actually declined versus the previous read), hinting at rising optimism. And like yesterday’s morning London session, euro bulls were relentless by shrugging off pessimistic news such as ECB President Mario Draghi’s semi-dovish statement that “growth is too low everywhere” and the usual Greek drama.

EUR/USD is up by 32 pips (+0.30%) to 1.1184, EUR/AUD is up by 82 pips (+0.58%) to 1.4153, EUR/NZD is up by 55 pips (+0.37%) to 1.5158

As for the pound, forex traders pushed it down for the session even though U.K. public sector net borrowing contracted more than expected. Suffice to say, it may just be end of the week profit-taking after yesterday’s rally with the lack of direct catalysts from the U.K.

GBP/USD is down by 40 pips (-0.27%) to 1.5632, GBP/CHF is down by 72 pips (-0.49%) to 1.4568, GBP/JPY is down by 18 pips (-0.10%) to 189.02

For the upcoming afternoon London/morning U.S. session’s forex calendar, there are lots of top-tier data lined-up for simultaneous release at 1:30 pm GMT, so watch out forex traders!

The most likely market-movers are the inflation data for the U.S. and Canada since inflation is a key metric for monetary policy decisions.  Forex traders should pay extra attention on U.S. CPI m/m (0.1% expected, 0.2% previous) since it is expected to decline, which doesn’t really go well with the Fed’s recent upgrade on its inflation outlook, as revealed in the latest FOMC meeting minutes. U.S. core CPI m/m, though, is expected to remain flat at 0.2%, but do watch out for any surprises.

As for Canadian inflation data, Canadian headline CPI m/m (0.1% expected, 0.7% previous) and Canadian core CPI m/m (0.2% expected, 0.6% previous) are both expected to decline significantly, so we may see some Loonie bears come in if the actual reading is as expected or worse.

We also have Canadian headline retail sales m/m (0.3% expected, 1.7% previous) and Canadian core retail sales m/m (0.4% expected, 2.0% previous) data. These indicators for consumer spending are expected to show significant declines; again, bad news for the Loonie if the actual readings are within expectations or worse.

Hold your horses! We also got ECB President Mario Draghi, BoE Governor Mark Carney, and BoJ Governor Haruhiko Kuroda as speakers at the ECB Forum on Central Banking in Portugal later at around 2:30 pm GMT. That’s a lot of central bank figures to listen to.

Lastly, Fed Chairperson Janet Yellen is scheduled to speak about the U.S. economy in Rhode Island at around 6:00 pm GMT. We shouldn’t expect much since the FOMC meeting minutes were released just recently, but it may be prudent to keep an ear out just in case there’s a surprise. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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