London Session Forex Recap – July 21, 2015

  • Swiss Trade Balance: 3.58B actual v.s. 2.54B expected, 3.41B previous
  • U.K. Public Sector Net Borrowing: 9.4B actual v.s. 8.7B expected, 9.1B previous

Economic data was in short supply during today’s morning London forex session, but that didn’t seem to affect volatility since almost all currency pairs were on the move. Lemme point out the most noticeable ones.

Up first is the Swiss franc. The Swissy was strong across the board, thanks to a significantly better-than-expected reading for Switzerland’s trade balance. The consensus among forex market analysts was that Switzerland’s trade surplus would narrow a bit, so it was a very pleasant surprise when the actual reading printed a slight improvement over the previous report.

USD/CHF is down by 26 pips (-0.27%) to 0.9605, GBP/CHF is down by 66 pips (-0.45%) to 1.4931, CAD/CHF is down by 20 pips (-0.27%) to 0.7391

Next up is the euro. There weren’t any economic data for the euro zone during the forex session, but the euro was fairly strong across the board. Rummaging through the news reports that were released during the session, it seems like forex traders were loading up on the euro shortly after reports were released that Greece has submitted the second bill required by its creditors before talks on a new bailout package could start. The Greek government’s apparent willingness to cooperate is certainly an optimistic development, which is probably why the euro saw a lot of buyers.

EUR/USD is up by 42 pips (+0.40%) to 1.0874, EUR/JPY is up by 47 pips (+0.35%) to 135.19, EUR/GBP is up by 34 pips (+0.49%) to 0.6987

The pound saw another round of selling. And even though public sector net borrowing was not within expectations, it still meant public finances were improving. And since there were positive developments from Greece, I don’t think continued pessimism over the U.K. being dragged into a Greek bailout is the reason for the weakness. I don’t think market sentiment was the reason either since U.K. 10-year bond yields were up by 2.18% to 2.109%.

It’s just a hunch, but I think forex traders are shifting their long-term sentiment on the pound. After all, the Bank of England has identified a strong pound as a significant barrier to both inflation and future rate hikes. BOE Governor Mark Carney reiterated this in his July 16 speech when he said that “developments in the exchange rate have been important for UK inflation and activity, and in particular we have experienced persistent exchange rate pass-through to headline inflation. This risk is particularly relevant at present when the monetary policy stance of our largest trading partner is diverging with ours.”

Of course, it could just be opposing currency price action and capital flow since both the euro and the Swissy were particularly strong against the pound, which meant capital was flowing to the euro and the Swissy at the expense of the pound. The pound finally found some buyers near the end of the forex session, though.

GBP/USD is down by 27 pips (-0.18%) to 1.5543 with 1.5528 as session low, GBP/JPY is down by 37 pips (-0.19%) to 193.32 with 193.03 as session low, GBP/AUD is down by 77 pips (-0.37%) to 2.1084 with 2.1051 as session low

The forex calendar for the upcoming afternoon London/morning U.S. has nothing lined up for release, so forex traders would probably be looking to news reports, market sentiment, and/or commodities for direction. In particular, make sure to keep an eye and an ear out for any updates on the Greek drama. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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