London Session Forex Recap – August 17, 2015

  • Swiss Retail Sales y/y: -0.9% actual v.s. 0.0% expected, -1.8% previous
  • Euro Zone Trade Balance: €21.9B actual v.s. €23.1B expected, €21.2B previous

Even though the forex calendar was almost empty, today’s morning London forex session saw enough volatility and directional movement to keep most forex traders interested.

Among the movers, the most noteworthy was the Aussie due to the relentless bearish pressure it encountered for most of the forex session. The Aussie’s slump was most likely a reaction to reports that Goldman Sachs is forecasting a 30% drop in iron ore prices in the next 18 months due to expanding supply and contracting demand.

To the newbie forex traders out there who are wondering what iron ore prices have to do with the Aussie, let me just say that Australia is a major exporter of iron ores, so lower iron ore prices would be bad for the Australian economy.

AUD/USD is down by 26 pips (-0.35%) to 0.7350, AUD/CHF is down by 27 pips (-0.38%) to 0.7180, AUD/NZD is down by 40 pips (-0.36%) to 1.1218

Another noticeable mover was the pound since it jumped during the German open and then began to grind lower as the forex session progressed. The jump was most likely caused by the hawkish comments from MPC Member Kristin Forbes who said that “Waiting too long would risk undermining the recovery – especially if interest rates then need to be increased faster than the gradual path which we expect.”

As for the eventual decline, it’s probably because MPC Member Forbes also warned that the pound’s strength is a major drag on inflation, although it’s also possible that demand for the pound began to fade due to the FTSE 100 ticking lower by 0.08% to 6,545.50 while U.K. 10-year bond yields tightened by 0.91% to 1.861% during the forex session.

GBP/USD is down by 38 pips (-0.24%) to 1.5628, GBP/JPY is down by 37 pips (-0.19%) to 194.54, GBP/CHF is down by 43 pips (-0.29%) to 1.5267

Moving along, the euro was noteworthy too since most euro pairs were up for the forex session even though the actual figure for the euro zone’s trade surplus was less-than-expected. It’s unlikely, but it’s possible that there was some demand for the euro due to the DAX being slightly up by 0.20% to 11,007.30. And if you consider the poor performance of the FTSE 100, there’s also a possibility that capital flow was lending some support to the euro. Specifically, capital was flowing to the euro at the expense of the pound, and EUR/GBP’s performance seems to confirm this.

EUR/USD is up by 3 pips (+0.03%) to 1.1101, EUR/AUD is up by 53 pips (+0.36%) to 1.5096, EUR/GBP is up by 21 pips (+0.30%) to 0.7103

The forex calendar for the upcoming afternoon London/morning U.S. session only has a few mid-tier and low-tier items, but let’s go through them shall we?

Up first, at 1:30 pm GMT, we’ll get the data for Canada’s foreign securities purchases (-5.95B expected, -5.45B previous) and the reading for the U.S. Empire State manufacturing survey (4.50 expected, 3.86 previous).

Based on the consensus among forex traders and analysts, foreign investors will continue to shun Canadian securities, so the Loonie may find some sellers if the actual figure for Canada’s foreign securities purchases come in as expected or worse. As for the Empire State manufacturing survey, it’s expected to improve, so keep an eye on the Greenback.

After that, at 3:00 pm GMT, forex traders will get the results for the U.S. NAHB builders survey (61.0 expected, 60.0 previous). Do note that this gauge for the housing market is expected to show a slight improvement, so we may see further demand for the U.S. dollar.

Finally, way late into the U.S. session at 9:00 pm GMT, we’ll get the U.S. net long-term TICS flows (23.0B expected, 93.0B previous). This measure the balance between foreign and domestic investments in the U.S., and it’s expected to decline, which could mean less demand for U.S. securities. It’s not usually a market-mover, though. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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