London Session Forex Recap – Oct. 13, 2015

  • German Final CPI: no revision at -0.2% as expected
  • German Final HICP: no revision at -0.3% as expected
  • Swiss PPI m/m: -0.1% as expected v.s. -0.7% previous
  • U.K. headline CPI m/m: -0.1% actual v.s. 0.0% expected, 0.2% previous
  • U.K. headline CPI y/y: -0.1% actual v.s. 0.0% expected, 0.0% previous
  • U.K. core CPI y/y: 1.0% actual v.s. 1.1% expected, 1.0% previous
  • German ZEW Current Conditions: 55.2 actual v.s. 64.0 expected, 67.5 previous
  • German ZEW Economic Sentiment: 1.9 actual v.s. 6.5 expected, 12.1 previous
  • Euro Zone ZEW Economic Sentiment: 30.1 as expected v.s. 33.3 previous

The pound was on the hot seat during today’s morning London forex session, thanks to U.K. headline inflation’s unexpected trip into negative territory.

Well, the downside dip for both the monthly and yearly readings weren’t really that unexpected since the Bank of England (BOE) DID warn in their most recent monetary policy meeting minutes 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.”

Despite the BOE’s warnings, some forex traders were still probably optimistic on inflation since most pound pairs were able to grind higher for the past few days. But they probably changed their minds when the actual reading came out today since the pound crashed and burned pretty hard during the forex session.

Heck, not even British brewing giant SABMiller’s acceptance of a £69 billion takeover proposal from Anheuser-Busch InBev was able to attract enough pound bulls to stop the bleed-out. It also probably didn’t help that newly-appointed MPC member Gertjan Vlieghe expressed his rather dovish take on the British economy during his testimony before the Treasury Select Committee.

GBP/USD is down by 135 pips (-0.88%) to 1.5240, GBP/JPY is down by 182 pips (-1.00%) to 182.44, GBP/CHF is down by 156 pips (-1.06%) to 1.4621

Moving on, the risk-off sentiment due to poor Chinese trade data from the earlier Asian trading session managed to make its way into the European session, causing European equities to crack under pressure, with the DAX down by 1.13% to 10,005.00 for the session. Most commodities were getting a beating as well, and the same can be said for U.S. equity futures since the S&P 500 futures was down by 0.41% to 2,002.75 during the forex session.

Even the forex market couldn’t escape the risk aversion, so demand for the safe-haven currencies naturally began to ramp up. Meanwhile, the higher-yielding comdolls extended their losing streak into the European forex session, although the Kiwi was fighting back despite a lack of catalysts. Most Kiwi pairs are still a long way away from intraday highs, however.

NZD/USD is up by 8 pips (+0.12%) to 0.6696, NZD/JPY is up by 5 pips (+0.06%) to 80.19, NZD/CAD is up by 32 pips (+0.36%) to 0.8743

As for the euro, it started the forex session on a strong foot, probably because the prevailing risk-off sentiment convinced some European equities traders to shift to the low-yielding euro for a while. The euro ended the trading session mixed, though, since the euro’s forex price action diverged shortly after the poor readings for various ZEW surveys came out, with the euro weakening against the safe-havens while gaining even more ground against the pound and most of the comdolls.

EUR/USD is up by 8 pips (+0.08%) to 1.1381, EUR/AUD is up by 60 pips (+0.39%) to 1.5599, EUR/GBP is up by 68 pips (+0.93%) to 0.7467

The forex calendar for the upcoming afternoon London/morning U.S. session is gonna be a bit on the light side again since we only have Uncle Sam’s federal budget balance on the docket ($91.0B expected, -$64.4B previous). It’s gonna be released at around 7:00 pm GMT, and do note that the general consensus is that it’s gonna print a surplus, so expect some demand for the Greenback if the actual reading meets or beats expectations. It’s a low to mid-tier item, though, so there’s also a chance that the market will not react at all.

Aside from that, BOE Chief Economist and MPC Member Andy Haldane will also have a speech in London at 6:00 pm GMT, so keep an ear out for any juicy updates. The BOE made it clear that the text of his speech will not be released, however, which is a real bummer.

Later on, at 9:10 pm GMT, RBNZ Governor Graeme Wheeler will deliver a speech about monetary policy and his economic outlook in Auckland. The head honcho of the RBNZ will enlighten us with his thoughts, so make sure to tune-in and keep an eye on the Kiwi for a possible reaction as well. The text of his speech will be released when he starts his speech, so make sure to grab a copy here. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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