London Session Forex Recap – May 28, 2015

  • Swiss Trade Balance: 2.86B actual v.s. 2.77B expected, 2.50B previous
  • Swiss Industrial Production y/y: -0.5% actual v.s. 2.1% previous
  • U.K. 2nd Est. GDP q/q: 0.3% actual v.s. 0.4% expected, 0.3% previous
  • U.K. 2nd Est. GDP y/y: 2.4% actual v.s. 2.5% expected, 2.4% previous
  • U.K. Prelim Business Investments q/q: 1.75 actual v.s. 1.2% expected, -0.9% previous
  • Euro Zone Consumer Sentiment: unchanged at -5.5 as expected
  • Euro Zone Economic Sentiment: 103.8 actual v.s. 103.5 expected, 103.8 previous
  • Euro Zone Industrial Sentiment: -3.0 actual v.s. -3.0 expected, -3.2 previous

Forex volatility picked up during today’s morning London session with the spotlight on the pound who up until today, only saw weakness against the Greenback this week, but finally got a beating from the other currencies shorty after revised GDP actually showed no revision from the prelim GDP reading of 0.3%. It’s not yet clear, but the current weakness may just be a knee-jerk reaction since prelim business investment q/q actually showed a better-than-expected improvement. Also, the 0.3% growth adds another notch (its 9th consecutive quarter) to the U.K. economy’s belt in terms of continued economic expansion.

GBP/USD is down by 77 pips (-0.50%) to 1.5291, GBP/JPY is down by 37 pips (-0.20%) to 189.71, GBP/CHF is down by 70 pips (-0.48%) to 1.4469

The pound sell-off likely boosted other currencies as capital had to flow elsewhere, namely the euro. The euro also got an additional boost when the euro zone economic sentiment posted a better-than-expected read, signifying increased optimism. As for updates to the Greek drama, it was mostly pessimistic. IMF Managing Director Christine Lagarde, for example, warned that the Greek debt talks still require work. ECB Vice President Vitor Constancio also hinted at a Greek default. Still, euro bulls just didn’t care (during this forex session at least) since the euro just kept going up. It still lost to the Greenback, though.

EUR/USD is down by 7 pips (-0.07%) to 1.0925, EUR/GBP is up by 31 pips (+0.44%) to 0.7145, EUR/CAD is up by 43 pips (+0.32%) to 1.3650

The Swissy was pretty strong too, even managing to hold out against the Greenback. The main catalyst was most likely the Swiss trade balance, which had a surprisingly better-than-expected reading–good news for the export-driven Swiss economy. This marks the second consecutive month of increases in trade surplus after taking a dip back in February.

USD/CHF is up by 4 pips (+0.04%) to 0.9464, NZD/CHF is down by 61 pips (-0.88%) to 0.6802, GBP/CHF is down by 70 pips (-0.48%) to 1.4470

And for the Aussie, there wasn’t really any new direct catalysts, but it showed severe weakness during the session, continuing the downward slide that started when Australian private capital expenditure posted a surprisingly worse-than-expected read during the Asian session.

AUD/USD is down by 43 pips (-0.55%) to 0.7651, AUD/JPY is down by 23 pips (-0.24%) to 94.95, AUD/CHF is down by 38 pips (-0.52%) to 0.7241

The upcoming afternoon London/morning U.S. session has mid-tier and low-tier data points for the Greenback and the Loonie lined-up in its forex calendar, promising a potentially exciting forex session after yesterday’s lackluster reaction to the BOC rate statement.

The forex session may start with a bang (or not) when the Canadian raw materials price index (1.6% expected, -0.9% previous), Canadian current account (-18.6B expected -13.9B previous), and U.S. jobless claims (270K expected, 274K previous) are released at 1:30 pm GMT.

Forex traders should watch out for the Canadian raw materials price index since this leading indicator for inflation is expected to show an improvement. Do recall that the BOC was slightly more dovish yesterday, so Loonie bulls are most likely keeping a close eye on this one.

Next, U.S. pending home sales m/m (0.9% expected, 1.1% previous) is scheduled for release at 3:00 pm GMT. This is a leading indicator for the housing market and is therefore quite important since the housing sector is usually closely linked with other sectors/industries such as construction and finance. This indicator is expected to decline, so Greenback bulls should watch out.

Lastly, U.S. crude oil inventories (-1.5M expected, -2.7M previous) will be released at 4:00 pm GMT. For newbies out there, this economic data point tends to affect the Loonie more than the Greenback because Canada is a major producer of oil. On that note, stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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