London Session Forex Recap – Oct. 8, 2015

  • Swiss Jobless Rate: 3.4% actual as expected v.s. 3.3% previous
  • German Trade Balance: €19.6B actual v.s. €20.2B expected, €22.4B 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: pound still has a negative impact on import prices and CPI
  • MPC Meeting Minutes: Q3 GDP expected to grow by 0.6%, lower than Q2’s 0.7%
  • MPC Meeting Minutes: near term inflation outlook has weakened since August
  • MPC Meeting Minutes: inflation expected to remain around 0% in the near-term
  • FOMC Meeting Minutes coming up

Forex traders had their sights 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. So, what happened and how did the pound react?

Well, most pound pairs actually found some buyers before the rate decision was announced and the MPC meeting minutes was released, likely due to speculative buying in the hopes that the MPC members would be delivering some goods news. Once the rate decision and minutes came out, however, the pound stalled for a minute or two, as forex traders tried to digest what they meant, before falling across the board due, perhaps, to profit-taking on the earlier bullish moves and forex traders who were none to happy with what the MPC members had to say. So, what did they say exactly?

Well, according to the minutes, the MPC members still think that the pound “continued to depress import price growth and so CPI inflation,” which is not exactly what you want to hear if you’re bullish on the pound.

They also added that the pound’s past appreciations meant that “domestic cost pressures would need to be commensurately stronger in order to return inflation sustainably to the 2% target.” In addition, they also said that “The near-term outlook for CPI inflation appeared slightly weaker than at the time of the August Inflation Report,” adding that inflation was “likely to remain close to zero before picking up around the turn of the year” but will remain “below 1% until spring 2016.” Moreover, the officials also said that evidence points to Q3 GDP growing only at 0.6%, which is a bit lower than Q2’s 0.7% growth.

GBP/USD is down by 16 pips (-0.11%) to 1.5294 with 1.5372 as session high, GBP/JPY is down by 8 pips (-0.05%) to 183.29 with 184.12 as session high, GBP/CAD is down by 64 pips (-0.32%) to 1.9931 with 2.0030 as session high

Aside from the pound. The only other major mover during the forex session was the euro. The euro got a lot of love at the start of the trading session, even though Germany’s trade surplus didn’t really meet the market’s expectations. One possible reason for the euro strength was that a report from the Organisation for Economic Co-operation and Development (OECD) was released at the time, claiming that the euro zone remained stable despite a weakening global economy, including the United States.

However, the euro later felt some selling pressure shortly after the release of the ECB’s monetary policy meeting accounts. Forex traders probably saw the ECB’s statement that it would take some time for the monetary policy measures “to pass through to the euro area economy,” which implied that “a substantial degree of accommodation was still in the pipeline.” Woah! Potentially more easing moves? No wonder some forex traders decided to dump the euro!

EUR/USD is up by 18 pips (+0.16%) to 1.1278 with 1.3148 as session high, EUR/JPY is up by 28 pips (+0.21%) to 136 16 with 135.47 as session high, EUR/AUD is down by -15 pips (-0.10%) to 1.5687 with 1.5760 as session high

The forex calendar for the upcoming afternoon London/morning U.S. session has a mixed line-up ranging from low-tier to top-tier items, although the highlight would probably be the FOMC meeting minutes, which is set for release at around 7:00 pm GMT.

We’ll start at 1:15 pm GMT with the figure for the number of housing starts in Canada (202.9K expected, 216.9K previous). It’s expected to show a slight decrease, which could mean a slowing housing market, so expect the Loonie to show some signs of weakness should the actual reading come in as expected or worse.

There’s a chance that Loonie forex traders will not react at all, however, since the reading for Canada’s house price index (0.2% expected, 0.1% previous) will be released shortly after that, at 1:30 pm GMT. Also at that time, we’ll get the number of jobless claims (274K expected, 277K previous) in the United States.

Then, at 7:00 pm GMT, we’ll finally get our hands on the FOMC meeting minutes. Make sure to look for any signs on the timing of a rate hike, alright? You can grab a copy here when it finally comes out.

Also at 7:00 pm GMT, forex traders will get to listen to BOE Governor Mark Carney as he talks about the global economy in an IMF meeting in Lima. Make sure to listen-in if he deviates from what was written in the MPC meeting minutes released earlier.

Finally, at 8:30 pm GMT, we’ll get another central banker speaker since San Francisco Fed President John Williams will be talk about his economic outlook. This will most likely be a non-mover, though, unless he says something different from what’s written in the FOMC meeting minutes, of course. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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