London Session Forex Recap – July 10, 2015

  • German Wholesale Price Index m/m: -0.2% actual v.s. 0.0% expected, 0.5% previous
  • Italian Industrial Production m/m: 0.9% actual v.s. 0.3% expected, -0.3% previous
  • French Manufacturing Production m/m: 0.6% actual v.s. 0.4% expected, -0.8% previous
  • French Industrial Production m/m: as expected at 0.4% v.s. -0.8% previous
  • U.K. Trade Balance: -8.0B actual v.s. -9.7B expected, -9.39B previous
  • U.K. Construction Output m/m: -1.3% actual v.s. 0.8% expected, -0.5% previous
  • Canadian jobs data coming up

The Greek drama was the focus of today’s morning London forex session, as the European markets priced-in the most recent developments, with the euro, the pound, and the Swissy all soaring like eagles.

The euro soared as the European market began pricing-in yesterday’s positive news that Greece has already submitted a new proposal in order to secure a much-needed bailout loan. And this isn’t another rumor since Eurogroup Chairman Jeroen Dijsselbloem’s spokesman has confirmed this, although no comment on the contents was forthcoming. No worries, though, since the proposal was leaked a couple of hours later.

Interestingly enough, many of the reforms proposed by the Greeks were very similar to the creditors’ own austerity proposals that were overwhelmingly rejected by the Greeks during the July 5 referendum. Nevertheless, this new development also caused the DAX to jump by 2.44% to 11,264.50 while German 10-year bond yields soared by a whopping 14.11% to 0.833%, further fueling demand for the euro.

EUR/USD is up by 99 pips (+0.90%) to 1.1192, EUR/JPY is up by 167 pips (+1.24%) to 136.92, EUR/AUD is up by 123 pips (+0.83%) to 1.4972

Optimism on the positive Greek developments also made its way to the U.K., with the FTSE 100 up by 1.26% to 6,664.80 and U.K. 10-year bond yields up by 4.04% to 2.036%. This equity rally and bond selling probably caused demand for the pound to increase since the pound was soaring too.

It’s also possible that forex traders who have been short on the pound for most the week were closing their trades in order to avoid weekend risk. And while there were some poor data from the U.K., pound bulls just shrugged them off like they were nothing.

GBP/USD is up by 119 pips (+0.78%) to 1.5521, GBP/CAD is up by 159 pips (+0.81%) to 1.9713, GBP/NZD is up by 207 pips (+0.91%) to 2.2993

As for the Swissy, it was actually the strongest currency in all of forex land (for this forex session at least). There were no catalysts to explain the Swissy’s overwhelming strength, so it’s probably just currency correlation between the euro and the Swissy due to their close trade relations, with more forex traders favoring the Swissy due to its status as a safe-haven currency.

Somehow, I keep imagining Swiss National Bank (SNB) Chairman Thomas Jordan frowning a lot, probably because the market is ignoring his mantra that the Swissy is “significantly overvalued” as well as his promise/threat that the SNB is willing “to take an active role in the foreign exchange market” to push the Swissy down.

USD/CHF is up by 107 pips (-1.14%) to 0.9354, NZD/CHF is up by 80 pips (-1.26%) to 0.6312, AUD/CHF is up by 81 pips (-1.15%) to 0.6986

The forex calendar for the upcoming afternoon London/morning U.S. session is a bit sparse, but don’t be fooled because we’ve got of heavy-hitters lined up.

At 1:30 pm GMT, forex traders will get data blitzed by Canada’s jobless rate (6.9% expected, 6.8% previous) and employment change (-10.0K expected, 58.9K previous). Loonie longs should be careful because both data points are expected to deteriorate.

Then, at 3:00 pm GMT, we’ll get the reading for U.S. wholesale inventories (0.3% expected, 0.4% previous). This is a leading indicator for business and consumer spending, and it is expected to decline, so watch it if you are long on the Greenback.

Finally, at 5:30 pm GMT, we’ll get a central banker bonus as Federal Reserve Chairperson Janet Yellen speaks about the economic outlook at a forum in Cleveland. Thee queen of the Fed herself is gonna be talking, so make sure to keep an ear out for any updates or changes in sentiment or economic outlook since the FOMC meeting minutes were released.

Make sure to keep an eye and ear out for any developments on the Greek drama too. Specifically, watch out for any comments from the creditors as well as the Greek parliament’s reaction to the proposal since they have the greatest potential of extending or capping the euro’s gains.

Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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