London Session Forex Recap – June 18, 2015

  • Swiss Trade Balance: 3.43 actual v.s. 2.86 expected, 2.66 previous
  • SNB maintains Libor rate at -0.75%
  • SNB says Swissy is “significantly overvalued”
  • SNB will “remain active”” in the forex market
  • U.K. Retail Sales m/m: 0.2% actual v.s. -0.1% expected, 0.9% previous
  • U.K. Core Retail Sales m/m: 0.2% actual v.s. -0.2% expected, 0.8% previous
  • Euro Zone LTRO: 73.8B actual v.s. 60.0B expected, 97.8B previous
  • U.S. CPI coming up

The morning London forex session was a very busy one, with the Greenback on the ropes and the Aussie as the one currency to rule them all. The pound was strong too while the euro and the Swissy were mostly mixed.

All other currencies were using the Greenback as a doormat during today’s morning London session, as the European markets priced-in yesterday’s FOMC statement, especially Fed Chair Yellen’s statement that “In spite of the appreciation of the dollar the committee obviously thinks that the economy is likely to do well enough to call, likely call, for some tightening later this year.” Such an obvious jab at the strong Greenback probably convinced some forex traders to go on a selling spree.

USD/JPY is down by 39 pips (-0.32%) to 122.64, USD/CAD is down by 67 pips (-0.55%) to 1.2152, NZD/USD is up by 66 pips (+0.96%) to 0.6960

The Swiss National Bank (SNB) decided to keep the interest rate on sight deposits at -0.75%, stating that the Swissy is “significantly overvalued” and that negative rates will therefore make the Swissy unattractive. The SNB also openly stated that it will “remain active in the foreign exchange market, as necessary, in order to influence monetary conditions.” Such rhetoric didn’t seem to affect the Swissy pairs, though, since most of them ended the forex session flat.

USD/CHF is down by 54 pips (-0.59%) to 0.9156, GBP/CHF is up by 12 pips (+0.08%) to 1.4583, CAD/CHF is up by 5 pips (+0.08%) to 0.7536

Most pound pairs ended the forex session on a high note after posting better-than-expected readings for retail sales data. Unfortunately, the current readings don’t really paint a pretty picture when compared to the previous readings, which is probably why the pound’s gains for the forex session were capped.

GBP/USD is up by 96 pips (+0.61%) to 1.5914, GBP/JPY is up by 51 pips (+0.26%) to 195.17, GBP/CAD is up by 19 pips (+0.10%) to 1.9348

Finally, we have the Aussie. The Aussie was very strong throughout the forex session even though there weren’t any economic data. Perhaps the market has finally began to price-in the China-Australia free trade agreement, a deal which would probably give Australia’s faltering export-driven economy a break. It’s also possible that the white paper on making Northern Australia into an “economic powerhouse” was the source of the Aussie’s strength. After all,  such a plan would certainly attract a lot of investors. Well, whatever the case may truly be, the fact remains that the Aussie was the mightiest currency of them all (during the morning London session at least).

AUD/USD is up by 83 pips (+1.06%) to 0.7819, AUD/JPY is up by 76 pips (+0.81%) to 95.99, AUD/NZD is up by 49 pips (+0.44%) to 1.1268

As for the euro, it was mostly mixed for the forex session but it was strong against the Greenback due to the dollar’s weakness; EUR/USD was up by 52 pips (+0.46) to 1.1395. It’s quite understandable since there weren’t really any economic data, nor was there any major update on the Greek drama.

The forex calendar for the upcoming afternoon London/morning U.S. session is jam-packed with U.S. data points, so I’ll only be pointing out the top-tier ones.

Forex traders will get a data dump at 1:30 pm GMT, with the release of the headline (0.5% expected, 0.1% previous) and core (0.2% expected, 0.3% previous) U.S. CPI readings. Also up for release at 1:30 pm GMT are the U.S. jobless claims (277K expected, 279 previous) and the U.S. current account (-116B expected, -113B previous).

The two CPI readings tend to have the greatest probability of moving the markets, but as Forex Gump pointed out in his blog, “policymakers are no longer as concerned about weak inflation as they used to be in their previous announcements,” and perhaps most forex traders think that way too. In any case, expectations for the CPI readings are mixed, with expectations that headline CPI will improve while core CPI is expected to slide a bit, so watch out.

At 3:00 pm GMT, we will get the U.S. Philadelphia Fed survey results (8.0 expected, 6.7 previous). This survey has about 250 manufacturers from the Philadelphia Fed’s district as respondents. It acts as a leading indicator of productivity and the overall economy. And it is expected to show further improvements in business conditions, so expected Greenback buyers to come in should the actual reading be within expectations or better.

Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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