London Session Forex Recap – July 1, 2015

  • Swiss Manufacturing PMI: 50.0 actual v.s. 49.9 expected, 49.4 previous
  • French Manufacturing PMI: 50.7 actual v.s. 50.5 expected, 50.5 previous
  • Italian Manufacturing PMI: 54.1 actual v.s. 54.4 expected, 54.8 previous
  • German Manufacturing PMI: unchanged at 51.9 as expected
  • Euro Zone Manufacturing PMI: unchanged at 52.5 as expected
  • U.K. Manufacturing PMI: 51.4 actual v.s. 52.5 expected, 51.9 previous
  • ADP jobs survey and U.S. PMI coming up

The forex market was rather subdued during the morning London session, with most currency pairs milling about in tight ranges. Not all currency pairs were well-behaved, though, since euro, pound, and U.S. dollar pairs were on the move.

The euro was on the move during the forex session, but its price action can best be described as a roller coaster ride. The euro jumped near the start of the session shortly after a letter from Greek Prime Minister Alexis Tsipras was leaked to the public. In that letter, Tsipras basically concedes to the creditors’ demands, although he also presented some conditions of his own. Other markets, especially European equities, happily took that piece of news since the DAX surged by 1.93% to 11,156.00.

After the early climb, the euro suddenly found some sellers when fear returned to the markets, thanks to reports that the initial results from the Greek referendum polls were rather disappointing since it showed that the majority of Greeks would vote to reject the bailout deal. Bearish pressure on the euro intensified further when unconfirmed reports came out that the creditors were not too happy with some of Tsipras’ conditions.

EUR/USD is down by 21 pips (-0.19%) to 1.1102 with 1.1170 as session high, EUR/JPY is up by 5 pips (+0.04%) to 136.51 with 137.40 as session high, EUR/NZD is up by 37 pips (+0.23%) to 1.6405 with 1.6461 as session high

Moving on, the pound was weak for most of the forex session. The pound got a pounding when U.K. manufacturing PMI failed to meet expectations, but the beating didn’t stop there. When the financial stability report was released, forex traders probably saw the part about aggregate U.K. household debt to income remaining “high compared to historical and international norms.” This raises some concern since a debt-fueled growth is inherently unstable and potentially dangerous.

As a side note, Bank of England (BOE) Governor Mark Carney had a press conference during the forex session, and while he was still optimistic on the economy and even reassured the markets that the U.K. has minimal exposure to Greece, he also reminded the market that interest rates aren’t going up anytime soon. Still, Carney was relatively upbeat and that was probably the reason why the pound’s losses were capped near the end of the forex session.

GBP/USD is down by 46 pips (-0.30%) to 1.5654, GBP/CAD is down by 32 pips (-0.17%) to 1.9595, GBP/AUD is down by 18 pips (-0.09%) to 2.0326

As for the Greenback, it was strong across the board during the forex session. There weren’t really any catalysts to account for the strength, so it was most likely just pre-emptive positioning ahead of top-tier U.S. data later.

USD/CAD is up by 17 pips (+0.14%) to 1.2517, USD/CHF is up by 44 pips (+0.46%) to 0.9412, USD/JPY is up by 28 pips (+0.23%) to 122.93

The forex calendar for the upcoming afternoon London/morning U.S. session is jam-packed with U.S. data, so I’ll just point out the heavy-hitting ones.

First, at 1:15 pm GMT, we’ll get the U.S. ADP employment survey (218K expected, 201 previous). This report is very important because it acts as a leading indicator for non-farm payrolls (NFP). If you plan to trade the NFP report tomorrow, make sure to check out Forex Gump’s trading guide for the NFP report.

After that, Markit’s U.S. manufacturing PMI (53.4 expected, 53.4 previous) will be released at 2:45 pm GMT. This indicator gauges the overall health of the manufacturing sector, but it isn’t likely to move the markets since most forex traders pay more attention to the ISM’s manufacturing PMI. It is expected to remain flat, though, so watch out for any surprises.

Finally, at 3:00 pm GMT, forex traders will get the ISM’s U.S. manufacturing PMI (53.2 expected, 52.8 previous). Do note that this indicator is expected to show an improvement, so get ready for dollar bulls if the actual reading is within or beats expectations.

Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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