London Session Forex Recap – June 1, 2015

  • Swiss Manufacturing PMI: 49.4 actual v.s. 47.6 expected, 47.9 previous
  • Spanish Manufacturing PMI: 55.8 actual v.s. 54.5 expected, 54.2 previous
  • Italian Manufacturing PMI: 54.8 actual v.s. 53.6 expected, 53.8 previous
  • German Manufacturing PMI: 51.1 actual v.s. 51.4 expected, 51.4 previous
  • Euro Zone Manufacturing PMI: 52.2 actual v.s. 52.3 expected, 52.3 previous
  • U.K. Manufacturing PMI: 52.0 actual v.s. 52.7 expected, 51.8 previous
  • German Prelim HICP m/m: 0.1% actual v.s. 0.1% expected, -0.1% previous
  • German Prelim HICP y/y: 0.7% actual v.s. 0.6% expected, 0.3% previous

Today’s morning London session was rather subdued for the most part, but still interesting with the pound, the euro, and the Aussie all grinding lower during the course of the forex session.

The euro was in Bizarro World (yes, I’ve read DC comics) during the forex session, taking a fall despite optimistic PMI readings for most of the major euro zone economies, excepting Germany. It gets even weirder because the PMI readings for all the major euro zone economies were in the 50’s range, indicating industry expansion.

Capital flow may have something to do with it because euro bond yields are higher, indicating that capital is flowing out. But it’s not clear where capital is flowing to, though, because the safe haven currencies were mixed for the session while gold was in the red. As for the reason for the capital outflow, the most obvious culprit is Greece and its apparent inability to pay its debt to the IMF this Friday, which is worsened on news that Greece and its creditors are in a deadlock. The euro did finally find some buyers near the end of the session, though, thanks probably to seller exhaustion and the better-than-expected readings for German prelim HICP.

EUR/USD is down by 18 pips (-0.17%) to 1.0918, EUR/CHF is down by 14 pips (-0.13%) to 1.0323, EUR/JPY is down by 27 pips (-0.20%) to 135.44

Moving on, the pound has been somewhat soft ever since the revised U.K. GDP actually showed no upside revision to the mere 0.3% expansion. The pound’s softness was especially highlighted during today’s forex session when U.K. manufacturing PMI disappointed forex traders by posting a less-than-expected reading (ignoring the improvement over the previous reading). The less-than-expected reading was attributed to lower demand from foreign markets and it’s highly unlikely due to the strong move, but it could also be pre-emptive positioning ahead of the coming MPC rate statement.

GBP/USD is down by 67 pips (-0.43%) to 1.5206, GBP/JPY is down by 85 pips (-0.44%) to 188.63, GBP/CAD is down by 48 pips (-0.25%) to 1.8984

As for the Aussie, it seems like it finally took in that dismal reading for Australian building approvals during the Asian forex session. That or forex traders abandoned the Aussie ship when Treasury Secretary John Fraser warned that lower interest rates are causing investors to over-invest in real estate, fueling a housing bubble in Sydney and other parts of Australia.

AUD/USD is down by 33 pips (-0.43%) to 0.7630, AUD/NZD is down by 38 pips (-0.36%) to 1.0719, AUD/JPY is down by 41 pips (-0.44%) to 94.65

The forex calendar for the upcoming afternoon London/morning U.S. session promises some volatility for the Greenback with a line-up of mid-tier items (and a sole top-tier item) after a mostly mixed performance during the morning London session.

At 1:30 pm GMT, forex traders will get a barrage of mid-tier consumption data: U.S. personal income (0.3% expected, 0.0% previous), U.S. personal spending (0.2% expected, 0.4% previous), and U.S. core PCE price index (0.2% expected, 0.1% previous). All of them are expected to show an improvement, with the exception of personal spending, so watch out.

Finally, at around 3:00 pm GMT, the sole top-tier item on the forex calendar will be released. The U.S. ISM manufacturing (52.0 expected, 51.5 previous) is a survey of about 400 purchasing managers with regard to their economic outlook and is usually a market mover because it acts as a leading indicator of productivity and the overall health of the economy. This item is expected to show an improvement, so watch out for any surprises, especially if the actual reading is below 50 since that would indicate industry contraction, which is bad for the Greenback.

As a bonus, Federal Reserve Governor Stanley Fischer is scheduled to speak at the American Bankers Association International Monetary Conference in Toronto, Canada at around 2:30 pm GMT. Do keep an ear out for any updates or juicy hints on the potential direction of future monetary policy. On that note, stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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