- French Current Account €1.0B actual v.s. €0.3B
- U.K. Jobless Rate: unchanged at 5.6% as expected
- U.K. Claimant Count Change: -4.9K actual v.s. 1.0K expected, 0.2K previous
- U.K. Average Earnings: 2.4% actual v.s. 2.8% expected, 3.2% previous
- Credit Suisse ZEW Survey: 5.9 actual v.s. -5.4 previous
- Euro Zone Industrial Production m/m: -0.4% actual v.s. -0.1% expected, -0.2% previous
- Euro Zone Industrial Production y/y: 1.2% actual v.s. 1.7% expected, 1.6% previous
Today was an explosive morning London forex session, with practically all currency pairs on the move. Lemme give y’all the lowdown on the main movers.
The main driver for today’s awesome level of volatility was the second devaluation of the Chinese yuan. And while forex traders were focused on dumping the Kiwi and the Aussie during the Asian session, European forex traders opted to dump the Greenback due, perhaps, to increasing doubts over a September U.S. rate hike.
U.S. 10-year bond yields also dropped by US 10Y Yield 1.16% to 2.114%, which would have placed some pressure on the Greenback. And the fact that the S&P 500 futures is down by 0.76% to 2,063.95 while the NASDAQ futures is down by 0.81% to 4,474.40 probably means less demand for the U.S. dollar too. In addition, there were rumors that Chinese state-owned banks were selling the Greenback on behalf of the People’s Bank of China (PBOC). Sneaky!
USD/CAD is down by 121 pips (-0.92%) to 1.2995, EUR/USD is up by 73 pips (+0.66%) to 1.1147, NZD/USD is up by 84 pips (+1.31%) to 0.6607
European traders also probably figured that Japan, which exports a lot of good to China, would have an even harder time since the second devaluation of the Chinese yuan would mean even less competitive Japanese exports. Which is probably why European forex traders sold off the yen during the morning London forex session.
USD/JPY is down by 66 pips (-0.54%) to 124.16, NZD/JPY is up by 58 pips (+0.72%) to 82.03, AUD/JPY is up by 68 pips (+0.74%) to 91.30
With the U.S. dollar bleeding out and out for the count, and risk-aversion slowly creeping in, European forex traders decided to do what they always do during times of uncertainty – flee to the sweet bosom of the safe-haven Swissy!
USD/CHF is down by 90 pips (-0.92%) to 0.9747, GBP/CHF is down by 119 pips (-0.78%) to 1.5202, EUR/CHF is down by 33 pips (-0.29%) to 1.0865
Moving right along, the prevailing risk-off sentiment probably dampened demand for the high-yielding pound, but the most likely reason for the pound’s overall weakness were the disappointing readings for claimant count change and wage growth since that would also mean lower consumer spending and sentiment.
GBP/USD is up by 20 pips (+0.13%) to 1.5594, GBP/JPY is down by 83 pips (-0.43%) to 193.59, GBP/AUD is down by 244 pips (-1.14%) to 2.1201
The forex calendar for the upcoming afternoon London/morning U.S. session is relatively a bit sparse, but let’s go through it, shall we?
Up first, at 1:30 pm GMT, we’ll get a central banker speaker in the person of Federal Reserve Bank of New York President William Dudley, who has a speech in Rochester regarding the regional economic outlook and benefits of workforce developments. You guys know the drill: keep an ear out for any juicy updates on economic outlook and monetary policy. Also keep an ear out for any insight or sentiment with regard to the labor market.
Next, at 3:00 pm GMT, we’ll get the reading for JOLTS job openings (5.33M expected, 5.36M previous). This is a leading indicator for future employment levels and it is expected to tick slightly lower, so watch it.
Finally, during the late U.S. session, at around 7:00 pm GMT, forex traders will get the U.S. federal budget balance (-$138.0B expected, $51.8B previous). Do note that the U.S. is expected to have a budget deficit after posting a budget surplus the last time around. This event is not usually a market-mover, though. Stay frosty!
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