London Session Forex Recap – August 26, 2015

  • Swiss UBS Consumption Indicator: 1.64 actual v.s. 1.68 previous
  • U.K. BBA Mortgage Approvals: 46.0K as expected v.s. 44.8K previous
  • U.K. CBI Distributive Trades: 24 actual v.s. 18 expected, 21 previous

After two rather volatile days, today’s morning London forex session was a relatively quiet one, with most currency pairs contently milling about in tight ranges. The only real movers during the forex session were the euro and the pound.

The euro started the session steady with some hints of potential strength, as European markets digested the 1.3% drop in Chinese equities despite another round of easing measures. After mulling for a bit, European market participants decided that the recent developments in China were a bad thing, causing risk aversion to come back and sending the DAX 0.38% lower to 10,089.50 during the session.

Capital flight from European equities likely dampened demand for the euro since the euro became broadly weak after that. But the final catalyst that sent the euro plunging was probably European Central Bank Executive Board Member Peter Praet’s comments during a press conference in Mannheim that “Developments in the world economy and commodity markets have increased the downside risk in achieving the sustainable inflation path towards 2 percent.” That particular comment most likely crushed the optimism of many forex traders who have been bullish on the euro.

EUR/USD is down by 78 pips (-0.68%) to 1.1418, EUR/JPY is down by 103 pips (-0.75%) to 136.31, EUR/CHF is down by 51 pips (-0.48%) to 1.0779

The pound was moving lower too despite the better-than-expected reading for CBI’s distributive trades and BBA’s mortgage approvals posting an improvement as expected. Concerns over China were also weighing-in on British equities, with the FTSE 100 down by 0.44% to 6,054.30 during the forex session, which probably sapped demand for the pound.

GBP/USD is down by 108 pips (-0.69%) to 1.5586, GBP/CAD is down by 182 pips (-0.88%) to 2.0687, GBP/AUD is down by 220 pips (-1.00%) to 2.1833

Interestingly enough, the comdolls were the ones dishing out the most pain against the pound. The pound has been rather strong against the comdolls, so it’s possible that forex traders were just taking profits on their pound longs.  It’s also possible that European forex traders were pricing-in China’s recent easing moves, concluding that it would be good for the comdolls. The Aussie, in particular was showing some strength during the forex session, although the surprisingly better-than-expected reading for construction work done from earlier probably helped.

AUD/USD is up by 26 pips (+0.36%) to 0.7140, AUD/JPY is up by 47 pips (+0.55%) to 85.47, AUD/CHF is up by 47 pips (+0.72%) to 0.6749

The forex calendar for the upcoming afternoon London/morning U.S. session only has the headline (-0.4% expected, +3.4% previous) and core (+0.3% expected, +0.6% previous) readings for U.S. durable goods orders scheduled for release at around 1:30 pm GMT.

The two readings act as leading indicators for production and provides hints on the level of consumer spending, which is why they tend to have an impact on the Greenback’s price action. Do note that both readings are expected to deteriorate, with the headline reading being expected to post a contraction after printing a solid increase previously, so be wary if you are bullish on the Greenback.

We also have a central banker bonus round at 3:00 pm GMT since Federal Reserve Bank of New York President William Dudley has a press conference in New York. Make sure to tune in for any juicy hints on economic outlook or the future direction of monetary policy. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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