London Session Forex Recap – June 10, 2015

  • French Industrial Production m/m: -0.9% actual v.s. 0.4% expected, 0.0% previous
  • Italian Industrial Production m/m: -0.3% actual v.s. 0.3% expected, 0.5% previous
  • U.K. Industrial Production m/m: 0.4% actual v.s. 0.1% expected, 0.6% previous
  • U.K. Manufacturing Production m/m: -0.4% actual v.s. 0.1% expected, 0.4% previous
  • RBNZ cash rate and rate statement due later

Risk sentiment was the name of the game during today’s morning London forex session, with the high yielding currencies steamrolling the safe havens. Risk appetite dominated the session, apparent in the equity markets with the FTSE 100 up by 0.34% to 6,777.00 and the DAX up by 1.05% to 11,116.30. U.S. equity futures were in the green too, with S&P 500 futures up by 0.34% to 2,087.15, while NASDAQ futures was up by 0.32% to 4,445.60.

This risk appetite was very apparent on the forex market too. The comdolls, in particular, were really tearing it up with USD/CAD down by 59 pips (-0.48%) to 1.2246, AUD/USD up by 26 pips (+0.35%) to 0.7743, and NZD/USD up by 31 pips (+0.43%) to 0.7190.

The high-yielding pound was pretty strong during the forex session too despite lower readings for both industrial and manufacturing production, and with manufacturing production posting a contraction to boot. The pound also got a boost because there were no major developments from the pro-Brexit group that I mentioned yesterday.

GBP/USD is up by 53 pips (+0.34%) to 1.5465, GBP/JPY is up by 88 pips (+0.47%) to 190.46, GBP/CHF is up by 74 pips (+0.51%) to 1.4373,

But what caused this sudden shift in risk sentiment during the forex session? Some analysts point to long term inflation expectations. That does sound feasible. Remember, the Euro zone annual headline inflation was up to 0.3% for May, but that doesn’t really explain the sudden shift, though. Other analysts were pointing to technical reasons, such as most European equity markets currently being oversold. Well, whatever the case may be, the fact still remains that risk appetite dominated the session.

Speaking of Europe, the euro jumped at the start of the session when another round of bond selling commenced, with German 10-year bond yields currently up by 5.66% to 1.007%. It then got clobbered by very disappointing industrial production data from France and Spain. As for updates to the Greek drama, there weren’t any major ones. There was a report that Greece was still awaiting an official response to its proposal, but other than that, there weren’t really any major developments.

EUR/USD is down by 25 pips (-0.22%) to 1.1272 from a session high of 1.1384, EUR/JPY is down by 17 pips (-0.12%) to 138.81 from a session high of 139.75, EUR/GBP is down by 33 pips (-0.45%) to 0.7295 from a session high of 0.7363

The forex calendar for the upcoming afternoon London/morning U.S. session may start off light, but it has a hard-hitting item near the end – the RBNZ cash rate.

At 3:00 pm GMT, forex traders will get the NIESR U.K. GDP estimate (0.4% previous). It’s not usually a market-mover, but do keep an eye on it.

Then, at 7:00 pm GMT, we’ll get a peek at the U.S. federal budget (-97.0B expected, 156.7B previous). This is also not usually a market-mover, although forex traders may be keeping an eye on it since it is expected to show a budget deficit.

Next, at 9:00 pm GMT, we’ll be having a bonus round since Bank of England Governor Mark Carney has a speech at the Annual Mansion House Dinner in London. You guys know the drill: keep an ear out for any changes in sentiment or for juicy hints on future monetary policy.

Finally, forex traders will be getting the main event at 10:00 pm GMT with the RBNZ cash rate which is expected to be maintained at 3.5%. It’s highly unlikely, but it’s possible that we may see a surprise and my buddy, Forex Gump, has listed down three reasons why.