London Session Forex Recap – May 27, 2015

  • German GFK Consumer Sentiment: 10.2 actual v.s. 10.0 expected, 10.1 previous
  • Swiss UBS Consumption Indicator: 1.25 actual v.s. 1.34 previous
  • French INSEE Consumer Confidence: 93 actual v.s. 95 expected, 94 previous
  • BOC overnight rate and rate statement coming up

Today’s morning London session gives me a sense of déjà vu due to the limited number of economic data points that were released during the forex session.  Fortunately for us forex traders, the light calendar in no way dampened volatility, with the Greenback and Swissy being on the attack yet again the story of the morning.

The Greenback was back on the war path, tearing up all the other currencies that stood in its way. There was really no direct catalyst that could have given the Greenback a renewed surge in strength during the session, and risk sentiment is not in play either since U.S. equity futures are currently in the green. The most likely reason is still the USD/JPY long-term consolidation breakout on recent Fed rate hike sentiment, which just broke through the previous high around the 123.30 handle, drawing in more Greenback bulls in the process.

USD/JPY is up by 73 pips (+0.60%) to 123.69, USD/CAD is up by 67 pips (+0.55%) to 1.2463, AUD/USD is down by 46 pips (-0.60%) to 0.7714

The Swissy was on the attack too, losing out only to the Greenback. But it was more subdued when compared to yesterday,probably thanks to the UBS consumption indicator being lower than the previous read, indicating pessimism and breaking the upward trend that started in January. As for the Swissy’s strength, there was really no other catalyst that could have caused it during the forex session, but the euro was mostly up for the session so currency correlation may have been in play with forex traders favoring the Swissy over the euro due to the Swissy’s safe haven status.

USD/CHF is up by 40 pips (+0.44%) to 0.9513, AUD/CHF is down by 29 pips (-0.38%) to 0.7325, EUR/CHF is down by 20 pips (-0.20%) to 1.0330

As for other currency moves of note, the euro was up overall, losing out only to the Swissy and the Greenback. The euro likely got a boost when German GFK consumer sentiment posted a better-than-expected reading near the start of the session. The sustained strength during the rest of the session, though, is a bit harder to explain. There wasn’t really any optimistic news on Greece during the forex session. In fact, there were some rather pessimistic but non-major news, such as U.S. Treasury Secretary Jack Lew’s warnings about a contagion effect if the IMF fails to show flexibility towards Greece.

There was also news from unspecified sources that the ECB kept the emergency liquidity assistance available to Greek banks at 80.2B euros, which does not bode well for cash-strapped Greece.

EUR/USD is down by 56 pips (-0.52%) to 1.0860, EUR/JPY is up by 19 pips (+0.14%) to 134.43, EUR/AUD is up by 28 pips (+0.20%) to 1.4090

The forex calendar for the upcoming afternoon London/morning U.S. session may be practically empty, but it’s in no way light since the Bank of Canada (BOC) is expected to announce the overnight rate at 3:00 pm GMT.

The overnight rate is expected to be kept on hold at 0.75%, but that doesn’t mean that volatility will be in short supply. As my good friend, Forex Gump, discussed in his Forex Trading Guide, the last time the BOC announced that it would kept monetary policy on hold, the Loonie pulled USD/CAD down by over 200 pips.

Of course, the last time the BOC held its key policy rate on hold, BOC officials were also delivering some rather upbeat sentiments about the Canadian economy. Perhaps we will see the same scenario again since recent Canadian economic data have been showing some improvements. Again, this is usually a market-mover, and a big one at that, so forex traders should keep an eye out on whether the BOC is hawkish or dovish, as well as for any surprise updates. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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