London Session Forex Recap – September 9, 2015

  • U.K. Industrial Production m/m: -0.4% actual v.s. 0.1% expected, -0.4% previous
  • U.K. Industrial Production y/y: -0.8% actual v.s. 0.2% expected, 0.2% previous
  • U.K. Manufacturing Production m/m: -0.8% actual v.s. 0.2% expected, 0.2% previous
  • U.K. Manufacturing Production y/y: -0.5% actual v.s. 0.5% expected, 0.5% previous
  • U.K. Trade Balance: -£11.1B actual v.s. -£9.5B expected, -£8.5B previous
  • BOC and RBNZ rate decisions and statements coming up

It was another risk-on day for European equities, with the DAX up by 1.75% to 10,451.50 during the forex session, but it seems like the forex market decided that it was time to decouple since most of the high-yielding currencies got a beating during today’s morning London forex session.

Let’s start with the high-yielding pound. The pound was actually consolidating throughout the forex session, but most pound pairs were grinding lower before ending the session in the red.

If you took a peek at the economic data points that came out during the forex session, then you pretty much guessed the reason for the pound’s rather weak performance – dismal readings for all ’em. These dismal readings effectively dampened optimism for a potential rate hike sometime next year, but what I find rather strange is the fact that there was no sell-off. Could this be a magical effect of Queen Elizabeth II becoming the longest-reigning U.K. monarch? Nah, probably not.

GBP/USD is down by 23 pips (-0.15%) to 1.5350, GBP/CHF is down by 73 pips (-0.49%) to 1.4994, GBP/NZD is down by 92 pips (-0.38%) to 2.4047

As for the high-yielding comdolls, they were also slightly in the red except for the Kiwi. There weren’t any direct catalysts that could explain the Kiwi’s strength, but there was an earlier report that tourism is set to overtake dairy exports as New Zealand’s main growth driver, which is quite understandable. After all, New Zealand is also known as Middle-Earth/Hobbit Land.

NZD/USD is up by 15 pips (+0.22%) to 0.6385, NZD/JPY is up by 41 pips (+0.54%) to 77.22, NZD/CAD is up by 43 pips (+0.51%) to 0.8453

Moving on, the safe-haven currencies were naturally taking adavntage of the weak high-yielders, but the Swiss franc was the strongest safe-haven of them all, which was rather strange since there weren’t any major catalysts for the Swissy. Maybe it was just a technical correction since most Swissy pairs ultimately gave back some of their gains after reaching price areas being watched by technical traders.

USD/CHF is down by 22 pips (-0.22%) to 0.9778 with 0.9716 as session low, AUD/CHF is down by 35 pips (-0.51%) to 0.6873 with 0.6838 as session low, CAD/CHF is down by 42 pips (-0.57%) to 0.7383 with 0.7348 as session low

As for the euro, its price action was a roller-coaster ride despite having no economic data points to give it direction. I may be off the mark, but maybe European forex traders were buying up the higher-yielding currencies using euro-funded positions at the start of the session, but later decided to unwind their positions before switching to European equities instead.

EUR/USD is down by 10 pips (-0.09%) to 1.1145 with 1.1207 as session high, EUR/AUD is up by 21 pips (+0.13%) to 1.5844 with 1.5926 as session high, EUR/JPY is up by 17 pips (+0.13%) to 134.68 with 135.02 as session high

The forex calendar for the upcoming afternoon London/morning U.S. session is jam-packed with mostly Canadian data and not one but two rate decisions, hinting at lots of volatility ahead. Let’s get this party started!

Up first, at 1:15 pm GMT, we’ll get the reading for Canada’s housing starts (190.5K expected, 193.0K previous) followed shortly by the reading for Canada’s bulding permits (-5.0% expected, 14.8% previous) at around 1:30 pm GMT. Do note that both housing market indicators are expected to deteriorate, so perhaps the Loonie will weaken further if the actual readings come in as expected or worse.

Next, at 3:00 pm GMT, forex traders will be treated to the Bank of Canada’s rate decision and rate statement. With regard to the overnight rate, the consensus is that the central bank will maintain it at 0.5%, but be prepared for a more dovish sentiment from the BOC, or even a surprise rate cut since Canada has already slipped into a technical recession.

Also at 3:00 pm GMT, we’ll get the readings for the U.K. NIESR GDP estimate (0.7% previous) and the U.S. JOLTS job openings (5.30M expected, 5.25M previous). The former is a leadng estimate for U.K. GDP while the latter is a leading indicator for the U.S. jobs market. Both mid-tier items would probably be overshadowed by Canada’s rate decision, though, but they may cause some volatility for their respective currencies, so keep an eye out.

Finally and way late into the U.S. session, at around 10:00 pm GMT, we’ll get another central bank rate decision. This time, we’ll get the Reserve Bank of New Zealands cash rate decision (2.75% expected, 3.00% previous) and statement. Do note that the central bank is expected to cut rates, so perhaps the happy Kiwi will get depressed as a result. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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