London Session Forex Recap – August 20, 2015

  • Swiss Trade Balance: CHF 3.75B actual v.s. CHF 2.59B expected, CHF 3.51B previous
  • German PPI m/m: 0.0% as expected v.s. -0.1% previous
  • U.K. Headline Retail Sales m/m: 0.1% actual v.s. 0.4% expected, -0.1% previous
  • U.K. Headline Retail Sales y/y: 4.2% actual v.s. 4.4% expected, 4.2% previous
  • U.K. Core Retail Sales m/m: 0.4% as expected v.s. -0.3% previous
  • U.K. Core Retail Sales y/y: 4.3% as expected v.s. 4.1% previous
  • U.K. CBI Industrial Trends: -1 actual v.s. -10 expected, -10 previous

The spotlight was on the pound during today’s morning London forex session, thanks to the U.K. retail sales report for July. Risk sentiment was in play too due to the FOMC meeting minutes, which sparked growth concerns and dampened expectations of a rate hike.

Forex traders dumped the pound when retail sales volume for July failed to meet the market’s expectations. Interestingly enough, the pound then began to claw it’s way back up around halfway through the forex session. The only catalyst then was the better than expected reading for CBI industrial trends, which is rather strange since it’s rarely a market-mover.

Perhaps long-term forex traders were loading up on the pound since the year-on-year retail sales estimate has been growing for 28 straight months and the core readings have been stable so far. In addition, the better-than-expected readings for U.K. CPI has been keeping the pound supported since they reinforce a potential rate hike sometime next year.

GBP/USD is down by 16 pips (-0.10%) to 1.5660 with 1.5603 as session low, GBP/JPY is down by 29 pips (-0.15%) to 194.09 with 193.27 as session low, GBP/CAD is down by 28 pips (-0.14%) to 2.0571 with 2.0526 as session low

The euro took advantage of the pound’s weakness and continued U.S. dollar softness due to the Fed’s not-so-hawkish sentiment, as gleaned from the latest FOMC meeting minutes. The euro also got a boost when reports began to circulate that Greece has finally received some of the bailout funds, which it promptly used to pay a €3.2 billion debt.

Moreover, ECB Supervisory Council Chairperson Danièle Nouy expressed her confidence in a Greek recovery, which further added to the perceived return to normalcy in the euro zone. Yep, the euro was such in demand that it just shrugged off the DAX’s 0.83% decline to 10,594.00 and the 6.64% contraction in German 10-year bond yields.

EUR/USD is up by 55 pips (+0.50%) to 1.1177, EUR/AUD is up by 71 pips (+0.47%) to 1.5293, EUR/JPY is up by 48 pips (+0.35%) to 138.54

Like a vampire, the Swissy happily fed on the risk-off sentiment, although the better-than-expected increase in trade surplus probably helped too. Overall, the Swissy was the second strongest currency during the session, losing out only to the euro.

USD/CHF is down by 18 pips (-0.19%) to 0.9624, GBP/CHF is down by 57 pips (-0.38%) to 1.5059, EUR/CHF is up by 32 pips (+0.30%) to 1.0770

The forex calendar for the upcoming afternoon London/morning U.S. session promises some volatility ahead, thanks to some heavy-hitters on the line up.

At 1:30 pm GMT, we’ll simultaneously get the readings for the U.S. jobless claims (271K expected, 274K previous) and Canada’s wholesale sales (0.9% expected, -1.0% previous). Do note the expectations for both data points, but pay extra attention to Canada’s wholesale sales since it is expected to improve significantly, so we may see some Loonie buyers if the actual reading comes in as expected or better.

After that, at 3:00 pm GMT, forex traders will get a small data dump for Uncle Sam with the release of the Philadelphia Fed manufacturing survey (6.5 expected, 5.7 previous), the CB leading indicator (0.2% expected, 0.6% previous), and existing home sales (5.43M expected, 5.49M previous). Please note that home sales in July is expected to slide down a bit but the Philadelphia Fed manufacturing survey is expected to show an increase. The CB leading indicator is also expected to decline a bit, but it’s a composite of previously released economic indicators, so it rarely moves the market. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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