London Session Forex Recap – July 9, 2015

  • German Trade Balance: 19.5B actual v.s. 20.5B expected, 21.8B previous
  • German Current Account: 11.1 actual v.s. 16.0 expected, 19.6 previous
  • BOE maintains bank rate at 0.50%
  • BOE maintains asset purchase facility at 375B

Today’s morning London forex session was a rather peaceful one given that volatility was in short supply. The only noticeable movers were the euro, the Swissy, and the Aussie.

The euro took a tumble at the start of the forex session, as it got smacked by disappointing German data and pessimistic rhetoric from European Central Bank (ECB) President Mario Draghi and Bundesbank President Jens Weidmann.

Draghi was quoted as saying that clinching a Greek deal would be “really difficult” while Weidmann took a much harder stance on the emergency liquidity assistance fund (ELA), saying that the “Eurosystem should not increase the liquidity provision, and capital controls need to stay in force until an appropriate support package has been agreed by all parties and the solvency of both the Greek government and the Greek banking system has been ensured.”

After the initial fall, the euro quickly found some support and began ranging for the rest of the forex session, thanks perhaps to a resurgence of risk appetite in the European markets, with the DAX up by 1.67% to 10,926.30 and German 10-year bond yields up by 1.46% to 0.694%.

EUR/USD is down by 55 pips (-0.50%) to 1.1040, EUR/JPY is down by 65 pips (-0.48%) to 134.06, EUR/CAD is down by 78 pips (-0.56%) to 1.4026

Up next is the Swissy. There weren’t any catalysts that could have caused the Swissy’s weakness, so it’s probably just capital flow from the safe-haven Swissy to the European equities. Of course, it’s also possible that the Swiss National Bank may have been following its mandate of manipulating the markets in order to weaken the strong Swissy.

USD/CHF is up by 60 pips (+0.64%) to 0.9497, NZD/CHF is up by 44 pips (+0.70%) to 0.6394, CAD/CHF is up by 61 pips (+0.85%) to 0.7484

Moving on, forex traders from the earlier forex session were apparently optimists since they were more interested on the positive Australian jobs data that came out. Forex traders of the European session, on the other hand, were pessimists since the Aussie was forced to retreat.

There were no direct catalysts during the session itself, but there were earlier reports that iron ore, a major Australian export, slumped hard by 10% to $44.59 per dry metric ton. Perhaps European traders were pricing-in that nasty piece of news. It’s also possible that forex traders were just taking some profits of the table, but that doesn’t explain the rather high volatility levels.

AUD/USD is down by 43 pips (-0.58%) to 0.7435, AUD/CAD is down by 54 pips (-0.57%) to 0.9451, AUD/JPY is down by 42 pips (-0.47%) to 90.36

And for other currencies of note, we have the pound. The pound is noteworthy because it barely reacted when the Bank of England (BOE) decided to maintain the current monetary policy. Perhaps forex traders weren’t interested because there was no rate statement. Looks like forex traders will have to wait until July 22 when the meeting minutes finally come out to see what the BOE officials have to say.

The forex calendar for the upcoming afternoon London/morning U.S. session is a bit on the light side, with only a few low-tier and mid-tier items lined up.

Up first, at 1:15 pm GMT, we’ll get Canada’s housing starts (190.0K expected, 201.7K previous). This is considered a low-tier item, so it’s not likely to move the markets, but forex traders should watch out because it is expected to decline.

Then, at 1:30 pm GMT, we’ll get the Canadian house price index (0.1% expected, 0.1% previous) and the U.S. jobless claims (275K expected, 281K previous). The house price index is expected to remain flat, so watch out for any surprises. The U.S. jobless claims, meanwhile, is expected to decline, so be careful if the actual reading is within or worse than expected. Remember, the recent jobs data from the U.S. were a bit of a disappointment.

Finally, at 3:15 pm GMT, we’ll get a central banker bonus round with Federal Reserve Governor Lael Brainard’s speech in Washington. You know the drill: keep an ear out for any juicy updates or shift in sentiment. We just got the FOMC meeting minutes, though, so we shouldn’t really expect much.

Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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