London Session Forex Recap – August 4, 2015

  • Spanish Unemployment Change: -74.0K actual v.s. -45.6K expected, -94.7K previous
  • U.K. Nationwide House Prices m/m: 0.4% as expected v.s. -0.2% previous
  • U.K. Nationwide House Prices y/y: 3.5% as expected v.s. 3.3% previous
  • U.K. Construction PMI: 57.1 actual v..s 58.5 expected, 58.1 previous
  • Euro Zone PPI m/m: -0.1% actual v.s. 0.0% expected, 0.0% previous
  • Euro Zone PPI y/y: -2.2% as expected v.s. -2.0% previous
  • New Zealand’s jobs data coming up later

Today’s morning London forex session was mostly light relative to the active Asia session, with most currency pairs happily moving in ranges for most of the trading session.

The Aussie became the star of the Asian forex session when it skyrocketed due to a not-so-dovish statement from the RBA and upbeat reports, but it only saw very little follow-through from European forex traders.

AUD/USD is up by 20 pips (+0.27%) to 0.7393, AUD/JPY is up by 18 pips (+0.20%) to 91.64, AUD/CAD is up by 21 pips (+0.21%) to 0.9706

The Kiwi was a bit up for the forex session too, which is strange because the prevailing sentiment seemed to have been a slight aversion to risk, with the DAX down by 0.30% to 11,409.30 and German 10-year bond yields down by 0.95% to 0.628%. Gold was also up by 0.16% to $1,091.10 per troy ounce. Perhaps the Kiwi was just dragged along by its currency correlation to the Aussie.

NZD/USD is up by 14 pips (+0.22%) to 0.6602, NZD/CHF is up by 22 pips (+0.35%) to 0.6395, NZD/JPY is up by 14 pips (+0.18%) to 81.84

Moving along, the euro’s price action was kinda wonky since it was slowly inching its way higher despite a decline in PPI readings, a worse-than-expected reading for Spanish unemployment change, and a poor performance from both the European equity and bond markets.

Considering that most euro pairs have been declining since last Friday and also considering that PPI readings came in as expected, it’s possible that forex traders may have already priced the readings in and the slight upmove was due to forex traders covering their shorts.

EUR/USD is up by 20 pips (+0.18%) to 1.0976, EUR/GBP is up by 16 pips (+0.23%) to 0.7037, EUR/CHF is up by 24 pips (+0.23%) to 1.0629

The pound’s overall price action was wonky too since it got positive readings for nationwide house prices and U.K. construction PMI was still above the 50.0 mark. Still, the pound started the forex session by dropping a bit, then ranging for most of the forex session before finally climbing back up again.

The earlier drop could have been due to the forex market’s inter-market relationship with the equity market since the FTSE 100 was down by 0.21% to 6,674.80. The later upmove is harder to explain, but it may have been due to forex traders finally pricing-in the positive data. It’a also possible that demand for the pound finally saw a pickup, thanks to U.K. 10-year bond yields widening by 0.96% to 1.886%.

GBP/USD is up by 17 pips (+0.11%) to 1.5618 with 1.5568 as session low, GBP/CHF is up by 34 pips (+0.23%) to 1.5136 with 1.5067 as session low, GBP/JPY is up by 14 pips (+0.08%) to 193.61 with 193.09 as session low

The forex calendar for the upcoming afternoon London/morning U.S. session may send volatility junkies into despair since the only items lined up are for release at 3:00 pm GMT are the readings for U.S. factory orders (1.8% expected, -1.0% previous) and U.S. IBD consumer optimism (47.6 expected, 48.1 previous).

Take note that the former is expected to improve while the latter is expected to deteriorate. Most forex traders would probably focus on factory orders, though, since it’s a mid-tier indicator for production.

Well, there are a couple of top-tier items, but they’ll come out way late into the U.S. session at 11:45 pm GMT: New Zealand’s employment growth (0.5% expected, 0.7% previous) and jobless rate (5.9% expected, 5.8% previous). Both labor market indicators are expected to deteriorate, so keep an eye on the Kiwi.

Oh, I almost forgot to mention that the dairy auction already started at 1:00 pm GMT. The results would likely affect the Kiwi too, so make sure to keep tabs on that. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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