London Session Forex Recap – June 17, 2015

  • Swiss ZEW Economic Expectations: 0.1 actual v.s. -0.1 previous
  • U.K. Jobless Rate: flat at 5.5% as expected
  • U.K. Claimant Count Rate: 2.3% actual v.s. 2.2% expected, 2.3% previous
  • U.K. Claimant Count Change: -6.5K actual v.s. -13.8K expected, -7.8K previous
  • U.K. Average Earnings Index: 2.7% actual v.s. 2.1% expected, 2.3% previous
  • BOE Meeting Minutes Released; 9-0 vote to hold main rate at 0.50% and asset purchases at £375B/month
  • Euro Zone Final CPI y/y: flat at 0.3% as expected
  • FOMC statement coming up

The MPC decided to maintain the current monetary policy while the Greek drama is devolving into a tragedy. How did the pound and the euro hold up during the forex session?

Well, the market held a positive view on the MPC minutes, especially on the part where it was stated that “wage growth was expected to pick up over the coming quarters, reflecting a further narrowing in the margin of slack in the labour market and a gradual recovery in productivity”. This was because the average earnings index was surprisingly better-than-expected, coinciding with the BOE’s statement and giving the pound a major boost. The BOE did warn of spillover risks from global rate rises in the MPC minutes, but the market didn’t seem to mind. The market also didn’t mind that claimant count change was worse-than-expected.

GBP/USD is up by 84 pips (+0.54%) to 1.5728, GBP/NZD is up by 227 pips (+1.01%) to 2.2698, EUR/GBP is down by 47 pips (-0.68%) to 0.7147

There were a lot of updates on the Greek drama during the forex session, such as the Greek central bank’s warning that “Failure to reach an agreement would… mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and, most likely, from the European Union.” Greek Prime Minister Alexis Tsipras also accused the creditors of attempting to “humiliate” Greece after he accused them of “pillaging” Greece yesterday. But those pessimistic reports didn’t faze euro bulls at all since the euro is mostly up for the session, losing out only to the Swissy and the pound. Perhaps forex traders were more interested in the euro zone’s final CPI, which showed no revision and inspires faith in a euro zone recovery.

EUR/USD is up by 9 pips (+0.08%) to 1.1267, EUR/JPY is up by 44 pips (+0.32%) to 139.55, EUR/CAD is up by 33 pips (+0.25%) to 1.3866,

The Swissy was pretty strong during the forex session. And while the improvement in Switzerland’s ZEW economic expectations probably helped, the most likely catalyst was the Swissy’s correlation to the euro, thanks to the close trading ties between Switzerland and the euro zone. Perhaps some forex traders were compelled to favor the safe-haven Swissy over the euro because of the prevailing Greek drama.

USD/CHF is down by 25 pips (-0.27%) to 0.9272, NZD/CHF is down by 45 pips (-0.70%) to 0.6421, AUD/CHF is down by 52 pips (-0.73%) to 0.7119

The Aussie and the Kiwi were noteworthy too since they both extended their Asian session losses, with AUD/USD down by 36 pips (-0.47%) to 0.7679 and NZD/USD down by 34 pips (-0.49%) to 0.6924. There weren’t really any catalysts for either currency during the forex session, but the Kiwi could still be reeling from the ever-lower GDT prices while the Aussie could be weaker due to lower gold prices during the session; gold is currently down by 0.18% to 1,178.80.

Oh yeah! The forex calendar for the upcoming afternoon London/morning U.S. session promises a lot of volatility due to the FOMC statement later. There are other items lined-up before the FOMC statement, though, and I’ll be pointing out the most important ones.

At 1:30 pm GMT, the reading for Canadian wholesale sales (0.3% expected, 0.8% previous) will be released. This is acts as a gauge for consumer spending since retailers tend to buy more stuff from wholesalers if consumer demand picks-up. And on that note, Loonie bulls should watch out because this economic indicator is expected to deteriorate.

We’ll then get U.S. crude oil inventories (-1.6M expected, -6.8M previous) at 3:30 pm GMT. This may be for the U.S., but it usually affects the Loonie because Canada is a major producer of oil.

Forex traders will then get a bonus round at 6:45 pm GMT when BOE Governor Mark Carney speaks at the International Organization of Securities Commissions. You guys know the drill: keep an ear out for any major updates, but look out specifically for clarifications on the MPC statement from earlier.

Finally, at 7:00 pm GMT, we will get the FOMC statement, with an FOMC press conference at 7:30 pm GMT. Even though the federal funds rate is expected to be kept on hold at 0.25%, this FOMC statement is important because it comes with the policymakers’ updated economic projections, which would give forex traders a better view of the Fed’s economic outlook. My buddy, Forex Gump, has a more in-depth analysis in his blog, so check it out!

Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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