London Session Forex Recap – July 14, 2015

  • German CPI m/m: unchanged at -0.1% as expected
  • German HICP m/m: unchanged at -0.2% as expected
  • German ZEW Economic Sentiment: 29.7 actual v.s. 29.0 expected, 31.5 previous
  • German ZEW Current Conditions: 63.9 actual v.s. 60.0 expected, 62.9 previous
  • Swiss Producer & Import Prices: -0.1% actual v.s. 0.0% expected, -0.8% previous
  • U.K. headline CPI y/y: 0.0% as expected v.s. 0.1% previous
  • U.K. core CPI y/y: 0.8% actual v.s. 0.9% expected, 0.9% previous
  • Euro Zone ZEW Economic Sentiment: 42.7 actual v.s. 51.1 expected, 53.7 previous
  • U.S. retail sales data coming up

A lot of of data points were released during today’s morning London forex session, but they didn’t seem to affect the markets much. So which currencies were on the move and what moved them?

Up first is the the pound. The pound got disappointing inflation data during the session, but forex traders weren’t paying attention since their eyes and ears were likely fixed on the Bank of England’s (BOE) inflation report hearing before the British Parliament’s Treasury Committee.

Forex traders were probably listening to BOE Governor Mark Carney’s testimony with a finger hovering above the “buy” button because pound pairs began to skyrocket mere seconds after Carney said that the “point at which interest rates may begin to rise is moving closer with the performance of the economy, consistent growth above trend, a firming in domestic costs, counter balanced somewhat by disinflation imported from abroad.”

In short, Carney was saying that the BOE may be hiking rates soon given the current developments, and that’s all that forex traders needed to hear to send the pound higher.

GBP/USD is up by 120 pips (+0.78%) to 1.5582, GBP/JPY is up by 131 pips (+0.69%) to 192.18, GBP/CAD is up by 162 pips (+0.82%) to 1.9924

The euro was mostly up too, even though most German and euro zone data were roughly within expectations, and some of them were even actually disappointing when compared with their previous readings. There were no major updates on the Greek drama either – Greek Prime Minister Alexis Tsipras was still having a hard time getting the Greek parliament to pass the reforms needed to comply with the creditors’ conditions.

Market sentiment wasn’t probably a factor since the DAX was down by 0.35% to 11,443.80, although the bond selling could have attracted some investors given that the German 10-year bond yields were up by a solid 2.00% to 0.866%. In the absence of any direct catalyst, it’s possible that the euro got a boost due to its currency correlation with the pound.

Well, whatever the case may truly be, the fact remains that the euro was showing some strength during the forex session.

EUR/USD is up by 43 pips (+0.40%) to 1.1021, EUR/AUD is up by 51 pips (+0.34%) to 1.4831, EUR/JPY is up by 47 pips (+0.35%) to 135.99

Another noticeable mover was the Swissy. The Swissy was gaining ground for most of the forex session, thanks to a possible pick up in inflation which was being hinted at by the reading for the producer and import prices index. It’s also possible that the slightly risk-off sentiment that pervaded the session caused some forex traders to favor the Swissy over the euro due to the Swissy’s safe-haven status.

USD/CHF is down by 70 pips (-0.74%) to 0.9447, EUR/CHF is down by 31 pips (-0.30%) to 1.0418, NZD/CHF is down by 34 pips (-0.54%) to 0.6314

In other news, a nuclear deal with Iran was finally reached, causing a tumble in oil prices as speculation that  Iran would be ramping up its oil production ran rampant. Brent crude oil was down by 0.83% to $57.66 per barrel during the forex session. Strangely enough, it didn’t seem to have an effect on the comdolls. The Loonie, in particular, should have reacted since Canada is a major oil producer but USD/CAD was essentially unchanged since it was only up by a mere 4 pips (+0.03%) to 1.2784.  It’s likely the reaction was mute because the deal was anticipated and priced in during the Asia session, evidenced by the broad weakness in Loonie early in the Tuesday session.

The forex calendar for the upcoming afternoon London/morning U.S. session has a couple of heavy-hitters lined up, so better get ready.

At 1:30 pm GMT, forex traders will get a small data dump with the release of the U.S. import price index (0.15% expected, 1.30% previous) as well as the the headline (0.3% expected, 1.2% previous) and core (0.5% actual, 1.0% previous) U.S. retail sales.

Most forex traders would probably be focusing on the retail sales data since they’re top-tier items. Do note that both the headline and core readings are expected to decline. Also, if you plan to trade this event, then make sure to check out Forex Gump’s forex trading guide.

Next, at 3:00 pm GMT, we’ll get the reading for U.S. business inventories (0.3% expected, 0.4% previous). This mid-tier item acts as a leading indicator for business and consumer spending. It is expected to decline, so watch it.

Finally, at 6:00 pm GMT, BOE MPC Member David Miles will deliver a speech titled “Weathering the storm: The recent past, present, and future of UK monetary policy” in London. BOE Guv’nah Mark Carney already spoke earlier, so we shouldn’t really expected much, but do keep an ear out just in case. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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