London Session Forex Recap – July 31, 2015

  • German Retail Sales m/m: -2.3% actual v.s. 0.3% expected, 0.4% previous
  • German Retail Sales y/y: 5.1% actual v.s. 4.0% expected, -1.05 previous
  • French PPI m/m: -0.2% actual v.s. 0.0% expected, -0.5% previous
  • French Consumer Spending m/m: 0.4% actual v.s. 0.5% expected, 0.1% previous
  • Euro Zone Jobless Rate: unchanged at 11.1% v.s. 11.0% expected
  • Euro Zone Flash HICP: 0.2% as expected, same as previous
  • Euro Zone Flash Core HICP: 1.0% actual v.s. 0.8% expected, 0.8% previous
  • Canadian GDP coming up

Up, down, and all around! Today’s morning London forex session was a blast, with almost all currency pairs on the move. Some currencies, though, were moving in a more uniform direction.

The first one to step up to the plate is the euro. The euro carved its way through its forex rivals like a hot knife through butter, finding bitter resistance only from the Swiss franc. There were a lot of economic data released during the forex session, but their readings were ultimately mixed.

Many forex traders probably had their sights on the euro zone’s harmonized index of consumer price (HICP), though, since the headline reading met the market’s expectations while the core reading came in better-than-expected, which is a big “thumbs up” to the euro zone economy and would help justifying an end to further easing moves.

Of course, it could also just end of the week profit-taking from the euro bears who want to avoid weekend risk; most euro pairs have been weak for most of the week, after all. It’s could also be end of the month volatility due to longer-term traders adjusting their bets.

There were also reports that came out during yesterday’s late London/morning U.S. session that the IMF won’t be attending the bailout talks with Greece and that Greece is disqualified from a new IMF bailout. And it’s possible that forex traders who shorted the euro based on those reports were covering their shorts when those rumors were finally invalidated.

EUR/USD is up by 25 pips (+0.24%) to 1.0978, EUR/JPY is up by 38 pips (+0.28%) to 136.40, EUR/AUD is up by 101 pips (+0.68%) to 1.5143

Moving right along, I already mentioned that the Swissy was putting up a fight against the euro earlier, but I didn’t mention why the Swissy was strong. And to be honest, there weren’t any apparent reasons for the Swissy’s strength. In fact, the Swiss National Bank (SNB) just posted a loss of CHF50.1 billion for the first half of 2015, which is not a very happy development.

Since there weren’t any other catalysts during the forex session, then perhaps currency correlation with the srong euro was in play, with some forex traders favoring the safe-haven currency over the euro. Although the SNB’s losses could also mean that the SNB won’t be able to interfere in the forex market as much, and longer-term traders who are expecting the Swissy to appreciate further are pricing that in.

USD/CHF is down by 22 pips (-0.23%) to 0.9622, NZD/CHF is down by 31 pips (-0.51%) to 0.6299, GBP/CHF is down by 45 pips (-0.30%) to 1.4984

The Kiwi and the Aussie were moving in one direction too – to the downside as European forex trader sold them off as hard as they could. There weren’t any direct catalysts for the severe weakness, so European traders were probably just pricing-in the horrible reading for New Zealand’s ANZ business confidence index (-15.3 actual, -2.3 previous) and Australia’s disappointing PPI reading (0.3% actual, 0.5% previous) from earlier.

AUD/USD is down by 41 pips (-0.57%) to 0.7238, AUD/JPY is down by 42 pips (-0.46%) to 90.05, AUD/CAD is down by 39 pips (-0.41%) to 0.9444

NZD/USD is down by 30 pips (-0.46%) to 0.6535, NZD/CAD is down by 27 pips (-0.32%) to 0.8528, NZD/CHF is down by 35 pips (-0.54%) to 0.6297

The forex calendar for the upcoming afternoon London/morning U.S. session is jam-packed with mid-tier and a couple of top-tier items, so the volatility party may not be over yet.

Up first, at 1:30 pm GMT, we’ll get the reading for Canada’s GDP (0.0% expected, -0.1% previous) as well as the U.S. employment cost index (0.6% expected, 0.7% previous). Loonie traders better pay attention since Canada’s GDP is expected to be flatten out, so a surprise reading could spark some volatility.

Next, at 2:45 pm GMT, forex traders are gonna get the Chicago PMI (50.8 expected, 49.4 previous). Do note that the market expects the actual reading to climb back into optimistic territory, so the Greneback may show some weakness if the actual reading fails to deliver.

Finally, at 3:00 pm GMT, we’ll get the final reading for the University of Michigan’s consumer surveys for July, with readings for consumer expectations (86.0 actual v.s. 85.2 previous), consumer sentiment (94.0 expected, 93.3 previous), and current conditions (106.3 expected, 106.0 previous) on tap. I have to point out that all indicators are expected to be revised upwards, so we may see some Greenback strength if the actual readings come in as expected or better. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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