London Session Forex Recap – September 17, 2015

  • Swiss Libor Rate: unchanged at -0.75% as expected
  • U.K. Headline Retail Sales m/m: 0.2% as expected v.s.0.0% previous
  • U.K. Headline Retail Sales y/y: 3.7% actual v.s. 3.8% expected, 4.1% previous
  • U.K. Core Retail Sales m/m: 0.1% as expected v.s. 0.3% previous
  • U.K. Core Retail Sales y/y: 3.5% actual v.s. 3.8% expected, 4.1% previous
  • Italian Trade Balance: €8.03B actual v.s. €2.47B expected, €2.81B previous
  • Fed rate decision and FOMC statement later

Despite the FOMC’s decision and statement looming ever closer, all was not calm in the forex front during today’s morning London forex session since most currency pairs were actually on the move.

Let’s start with the pound. Most pound pairs started the session on a strong note due, perhaps, to pre-emptive positioning by forex traders who read Forex Gump’s Forex Trading Guide for the event (okay, I’m half joking there).

Forex traders then dumped the pound as a knee-jerk reaction when it was revealed that the year-on-year readings failed to meet the market’s expectations. There was no sell-off, however, since the pound immediately found enough buyers to stay supported for a while before finally moving higher.

The most likely reason for the pound later price action is that most forex traders realized that the month-on-month readings actually showed an improvement even though they were within expectations. Moreover, the retail sales report mentioned that while the year-on-year increase was lower than the previous reading, it still marked the 29th consecutive month of growth, and that’s a great thing.

GBP/USD is up by 25 pips (+0.16%) to 1.5530, GBP/NZD is up by 88 pips (+0.36%) to 2.4500, GBP/CAD is up by 51 pips (+0.25%) to 2.0491

Another major mover was the Swissy, which jumped higher shortly after the Swiss National Bank (SNB) announced that its target range for the Libor rate is still between -1.25% and -0.25%, or -0.75%. In the SNB’s monetary policy statement and a radio interview that followed, SNB Chairman Thomas Jordan repeated his mantra that the “Swiss franc is still significantly overvalued” and that the SNB is still willing and ready to “remain active in the foreign exchange market as necessary,” but that didn’t faze forex traders who were bullish on the Swissy.

The SNB also cut its inflation forecasts due to the recent drop in oil prices, but it seems like most forex traders were more interested on the SNB’s growth outlook since the “SNB expects economic activity to pick up gradually in the second half of the year.”

USD/CHF is down by 20 pips (-0.21%) to 0.9684, AUD/CHF is down by 35 pips (-0.61%) to 0.6938, CAD/CHF is down by 22 pips (-0.30%) to 0.7341

The euro was mostly moving higher during the forex session too, although most euro pairs had a choppier forex price action. The most likely reasons for the euro’s strength were Italy’s higher-than-expected trade surplus and the euro’s currency correlations with the appreciating Swissy and pound since the euro barely budged against those two currencies. It also probably helped that the DAX was up by 0.25% to 10,252.50 during the forex session.

EUR/USD is up by 21 pips (+0.19%) to 1.1324, EUR/GBP is up by 3 pips (+0.05%) to 0.7291, EUR/CHF is down by 7 pips (-0.06%) to 1.0962

As for the other movers, we have the comdolls. All the comdolls were slowly grinding lower throughout the forex session, thanks probably to sliding commodity prices. Oil prices were sinking lower during the forex session after surging higher yesterday, with Brent crude oil down by 1.59% to $48.96 per barrel. Gold, meanwhile, was slightly down by 0.29% to $1,115.80 per troy ounce. Not exactly an environment for the comdolls to thrive, huh?

AUD/USD is down by 20 pips (-0.29%) to 0.7163, AUD/CHF is down by 30 pips (-0.45%) to 0.6941

NZD/USD is down by 10 pips (-0.16%) to 0.6340, NZD/CHF is down by 21 pips (-0.32%) to 0.6143

USD/CAD is up by 12 pips (+0.09%) to 1.3194, EUR/CAD is up by 32 pips (+0.23%) to 1.4931

Most forex traders probably have set their clocks for the Fed’s rate decision (0.25% expected, 0.25% previous) and FOMC statement at around 7:00 pm GMT, as well as the FOMC press conference that would shortly follow at 7:30 pm GMT. Do note that many forex traders and analysts are no longer expecting a rate hike, though, given the recent developments in China and the volatility in the financial markets.

In any case, we also have other items lined up for the Uncle Sam before the Fed’s big announcement, so let’s quickly go though the forex calendar for the upcoming afternoon London/morning U.S. session.

At 1:30 pm GMT, we’ll get the jobless claims (275K expected, 275K previous), current account (-$111.0B expected, -$113.3B previous), building permits (1.16M expected, 1.13M previous), housing starts (1.16M expected 1.21M previous).

Take note that the number of building permits is expected to increase while the number of residential building that have actually started construction is expected to decrease, so we may see an interesting reaction from the Greenback if the actual readings are within expectations.

After that, at 3:00 pm GMT, we’ll get the Philadelphia Fed’s manufacturing survey (5.9 expected, 8.3 previous). Do note that it’s expected to decline, so watch how the Greenback reacts since it would still be a few hours before the Fed’s decision is announced. Good luck and stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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