London Session Forex Recap – July 28, 2015

  • U.K. Preliminary Q2 GDP q/q: as expected at 0.7% v.s. 0.4% previous
  • U.K. Preliminary Q2 GDP y/y: as expected at 2.6% v.s. 2.9% previous
  • U.K. Index of Services m/m: as expected at 0.3% v.s. 0.2% previous
  • U.K. Index of Services q/q: 0.4% actual v.s. 0.5% expected, 0.5% previous

Risk appetite from the Asian trading session carried over into today’s morning London forex session, with the DAX up by 1.40% to 11,211.50 while bond-selling sent German 10-year bond yields higher by 4.17% to 0.724%. And as a result, the safe-haven currencies got slapped around by the high-yielding comdolls.

The only safe-haven that managed to put up a fight was the steadfast Greenback, probably because U.S. equity futures were enjoying the risk-on sentiment too, with the S&P 500 futures up by 0.49% to 2,074.65 and NASDAQ futures up by 0.40% to 4,540.80. For the newbie forex traders out there who are wondering how the equity markets are related to the forex market, make sure to check out our School of Pipsology’s awesome (yet fun and simple) course on the subject.

USD/CAD is up by 4 pips (+0.03%) to 1.3018, NZD/USD is down by 6 pips (-0.09%) to 0.6659, AUD/USD is down by 3 pips (-0.05%) to 0.7312

The high-yielding pound got a boost from the overall market sentiment too, and began giving the safe-havens a good thumping. But the pound then went into “Hulk Smash” mode against all of its forex rivals shortly after the preliminary reading for Q2 2015 GDP came in at market expectations, which is a very optimistic development since the quarter-on-quarter reading showed that the economy grew at a faster rate versus the previous quarter. And that, in turn, means that the Bank of England (BOE) is still on track for a potential rate hike soon.

GBP/USD is up by 33 pips (+0.21%) to 1.5591, GBP/CHF is up by 71 pips (+0.47%) to 1.5058, GBP/JPY is up by 74 pips (+0.39%) to 192.99

As for the euro, it got little love from forex traders, even though the DAX was up and European bond yields were relatively attractive. There weren’t any catalysts that could account for the euro’s weakness, nor were there any major developments on the Greek drama. Well, there was a report on Greece possibly reopening its stock market by tomorrow, but that’s good news, so no cigar.

Perhaps capital flow was in play. Specifically, risk appetite caused capital to flow to the pound and the comdolls at the expense of the euro. It’s also possible that some longer-term forex traders were just taking some delicious profits off the table. After all, the euro has been moving higher for about a week now due to the relatively stable situation in Greece.

Well, whatever the case may truly be, the fact remains that the euro was the weakest currency in all of forex land (for this trading session at least).

EUR/USD is down by 27 pips (-0.25%) to 1.1027, EUR/CAD is down by 31 pips (-0.22%) to 1.4357, EUR/GBP is down by 30 pips (-0.43%) to 0.7073

The forex calendar for the upcoming afternoon London/morning U.S. session has a slew of economic data lined up, but they’re mostly low-tier stuff. But there are some higher-tier items among the lot, and I’ll be pointing ’em out.

Okay, we’ll start at 1:30 pm GMT with the release of Canada’s raw materials price index (1.0% expected, 4.4% previous) and industrial product price index (0.4% expected, 0.5% previous).

Both are leading indicators for inflation and both are expected to decline, so watch out if you are long on the Loonie. In the odd chance that the two indicators conflict, forex traders usually focus on the raw materials price index since the other one only takes domestically produced goods into account.

Next, at 2:00 pm GMT, we’ll get the S&P Case-Shiller U.S. home price index (5.60% expected, 4.91% previous). This housing market indicator is expected to improve, but it’s considered a low-tier item, so don’t expect much.

After that, forex traders will get Markit’s flash services PMI (55.1 expected, 54.8 previous) at 2:45 pm GMT, followed by the CB U.S. consumer confidence index (100.0 expected, 101.4 previous).

The CB consumer confidence index is a top-tier item and its reading is expected to show a decline. The consensus is that consumer sentiment would become neutral at 100.0, so keep a close eye on the Greenback if the actual reading falls below or goes above expectations.

Finally, at 7:00 pm GMT, we’ll get a bonus round as BOE Deputy Governor Jon Cunliffe speaks in London. You know the drill, guys: keep an ear out for any updates or shifts in sentiment. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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