London Session Forex Recap – July 7, 2015

  • Swiss Jobless Rate: unchanged at 3.3% as expected
  • Swiss Foreign currency Reserves: 516.2b actual v.s. 517.5B previous
  • German Industrial production m/m: 0.0% actual v.s. 0.1% expected, 0.6% previous
  • French Trade Balance: -4.02B actual v.s. -3.60B expected, -3.31b previous
  • U.K. Manufacturing Production m/m: -0.6% actual v.s. 0.1% expected, -0.4% previous
  • U.K. Industrial Production m/m: 0.4% actual v.s. -0.2% expected, 0.3% previous
  • U.S. and Canadian trade data coming up

Lots of data, lots of volatility, and lots of fun. Today’s morning London session saw currency pairs moving all over the place, although some currencies were moving in one general direction.

Up first is the pound. The pound got a severe pounding throughout the forex session, and it all started when the U.K. manufacturing production release posted a very, very disappointing reading. Things then only got worse when risk aversion sentiment began to take hold in the market, causing a round of bond-buying that pushed the U.K. 10-year bond yield down by 5.18% to 1.903%, which also likely created downward pressure on the pound.

GBP/USD is down by 111 pips (-0.71%) to 1.5455, GBP/JPY is down by 168 pips (-0.88%) to 189.35, GBP/CAD is down by 76 pips (-0.39%) to 1.9644

Coming in at second is the Aussie. While forex traders weren’t sure what to make of the Reserve Bank of Australia’s (RBA) most recent monetary policy statement during the Asian session, forex traders of the European market had only one thing in mind: Sell the Aussie! And sell they did.

AUD/USD is down by 49 pips (-0.66%) to 0.7433, AUD/NZD is down by 48 pips (-0.43%) to 1.1192, AUD/JPY is down by 78 pips (-0.85%) to 91.07

With two currencies bleeding out big time, there has to be a vampire around, right? And given the prevailing risk aversion sentiment, our primary suspects are therefore the safe-haven currencies. The Swiss franc was moving all over the place, so scratch that off the list. How about the Greenback? Well, the Greenback seems to be in play since it was pretty strong during the forex session.

USD/CHF is up by 40 pips (+0.43%) to 0.9491, USD/CAD is up by 60 pips (+0.48%) to 1.2725, NZD/USD is down by 26 pips (-0.40%) to 0.6629

The Greenback wasn’t the real winner, though.  The real king (or queen) of the pips (for this forex session at least) was the Japanese yen since it managed to win out even against the mighty Greenback. There weren’t any catalysts that could have convinced forex traders to favor the yen, though, so maybe they saw Forex Gump’s write-up on the Japanese economy. I’m (half) joking, of course, but this tendency to flee to the yen also happened last week, as discovered by our resident spy, Forexninja, who undertook the not-so-dangerous mission of looking at the latest CFTC COT forex positioning report.

USD/JPY is down by 36 pips (-0.30%) to 122.34, CHF/JPY is down by 92 pips (-0.72%) to 128.85, NZD/JPY is down by 57 pips (-0.71%) to 81.09

As for the euro, there weren’t any major updates on the Greek drama other than the usual rhetoric, so most euro pairs were driven primarily by their opposing currency’s price action. The euro was mostly weak, though, thanks perhaps to German 10-year bond yields dropping down by a whopping 12.06% to 0.678% for the forex session, not to mention a couple of disappointing data that came out.

EUR/USD is down by 72 pips (-0.65%) to 1.0952, EUR/JPY is down by 123 pips (-0.90%) to 134.09, EUR/CHF is up by 10 pips (+0.16%) to 0.7093

Will the Greenback hold onto its gains in the upcoming afternoon London/morning U.S. session?

If you have open USD/CAD positions, then I suggest that you be extra careful since we’ve got Canada’s merchandise trade (-2.55B expected, -2.97B previous) and the U.S. trade balance (-42.7B expected, -40.9B previous) as our main event at 1:30 pm GMT. Do note that while both economies are expected to have trade deficits, Canada’s trade deficit is expected to decline while Uncle Sam’s trade deficit is expected to increase, so forex traders who are long on USD/CAD should watch out if the actual reading is within expectations.

Other items in the forex calendar include the the U.S. IBD consumer optimism (48.9 expected, 48.1 previous), the U.S. JOLTS job openings (5.33M expected, 5.38M previous), and the U.K. NIESR GDP estimate (0.6% previous). All three indicators are scheduled for release at 3:00 pm GMT. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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