London Session Forex Recap – September 10, 2015

  • French Manufacturing Production m/m: -1.0% actual v.s. 0.4% expected, -0.6% previous
  • French Industrial Production m/m: -0.8% actual v.s. 0.2% expected, -0.1% previous
  • U.K. Halifax House Price Index: 2.7% actual v.s. 0.5% expected, -0.4% previous
  • MPC Meeting Minutes: 8-1 vote to hold main rate at 0.50% as expected
  • MPC Meeting Minutes: 9-0 vote to hold asset purchases at £375B/month
  • MPC Meeting Minutes: strong pound still has a negative impact on import prices
  • MPC Meeting Minutes: U.K. has a “continued healthy domestic expansion”
  • MPC Meeting Minutes: global developments have not yet altered economic outlook

The spotlight was on the pound during today’s morning London forex session, thanks to the Bank of England’s (BOE) rate decision and the accompanying Monetary Policy Committee’s (MPC) meeting minutes. The pound wasn’t the only mover, though, since the comdolls were also busy bustin’ the moves.

Most pound pairs started grinding higher at the start of the forex session, probably due to pre-emptive positioning by forex traders and as a response to the significantly better-than-expected reading for the Halifax house price index, which shows that house price growth in the U.K. is still rather robust.

The pound then jumped higher once the MPC meeting minutes came out, probably because the BOE said that the U.K. has a “continued healthy domestic expansion” due to “robust real income growth, supportive credit conditions, and elevated business and consumer confidence.”

The BOE also said that downside risks to growth have increased because of “markedly higher volatility in commodity prices and global financial markets” brought about by recent developments in China, as well as other emerging economies. But the BOE was quick to add that the recent global developments “do not as yet appear sufficient to alter materially the central outlook described in the August [Inflation] Report.”

After that, once the dust has settled, pound pairs began to find themselves under bearish pressure. There weren’t any catalysts, so it was probably just profit-taking. Although it’s quite possible that forex traders were taking to heart the BOE’s complaints about the pound being still too darn strong, but I highly doubt it.

GBP/USD is up by 41 pips (+0.27%) to 1.5392 with 1.5448 as session high, GBP/JPY is up by 117 pips (+0.63%) to 186.45 with 187.33 as session high, GBP/CAD is up by 87 pips (+0.43%) to 2.0403 with 2.0447 as session high

As for the comdolls, they were surprisingly strong during the forex session despite an absence of catalysts and the mostly risk-off sentiment, with the DAX down by 1.08% to 10,191.50 during the forex session. The Aussie, in particular, was actually the strongest currency of the session. Heck, it even managed to win out against the mighty pound, with GBP/AUD down by 66 pips (-0.31%) to 2.1781 during the forex session.

Looking at other markets, there was a broad rally among commodities during the forex session that started during the earlier Asian session, likely as a response to the better-than-expected rise in Chinese CPI (2.0% actual v.s. 1.9% expected, 1.6% previous). Some analysts were such pessimists, however, that they focused on the disappointing PPI reading instead (-5.9% actual v.s. -5.6 expected, -5.4% previous). Still, that wasn’t enough since the commodities rally carried over into the European market, with gold up by 0.34% to $1,105.70 per troy ounce and Brent crude oil up by 0.12% to $47.63 per barrel during the forex session.

Another possible reason for the comdolls’ strength during the forex session was the jump in offshore yuan, which means that commodity exports entering China would now be more competitive.

AUD/USD is up by 42 pips (+0.60%) to 0.7067, AUD/CHF is up by 45 pips (+0.67%) to 0.6899, AUD/NZD is up by 41 pips (+0.37%) to 1.1228

NZD/USD is up by 17 pips (+0.29%) to 0.6297, NZD/CHF is up by 19 pips (+0.32%) to 0.6147, NZD/JPY is up by 40 pips (+0.52%) to 76.17

USD/CAD is up by 20 pips (+0.15%) to 1.3254, CAD/CHF is up by 11 pips (+0.15%) to 0.7382, CAD/JPY is up by 25 pips (+0.28%) to 91.43

The forex calendar for the upcoming afternoon London/morning U.S. session is has a lot of data points lined up, but they’re mostly low and mid-tier items.

We’ll get a mini data blitz at 1:30 pm GMT with the simultaneous release of Canada’s house price index (0.2% expected, 0.3% previous) and capacity utilization rate (81.7% expected, 82.7% previous) together with Uncle Sams’s import price index (-1.6% expected, -0.9% previous) and jobless claims reading (275k expected, 282K previous).

After that, at 3:00 pm GMT, forex traders will get the reading for Uncle Sam’s wholesale inventories (0.3% expected, 0.9% previous). This data point measures the change in the total value of inventoried goods stored by wholesalers and manufacturers. It’s only considered a low to mid-tier item, but it acts as a leading indicator for the retail sector, and thus, consumer spending since wholesalers would be emptying their inventories quicker if retailers are buying more in response to consumer demand. Do note that the reading is expected to improve, which reflects higher demand from retailers.

We also got a couple of low-tier items for New Zealand way late into the U.S. forex session. Up first, at 11:30 pm GMT, is Business NZ’s manufacturing index (53.5 previous) followed closely by New Zealand’s food price index (0.6% previous) at 11:45 pm GMT. Again, both are low-tier items, so they probably won’t be moving the markets much, but it’s still good to know that they’re coming’ out. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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