London Session Forex Recap – Oct. 14, 2015

  • French CPI m/m: -0.4% as expected v.s. 0.3% previous
  • French HICP m/m: -0.4% as expected v.s. 0.4% previous
  • U.K. Average Earnings Index: 3.0% actual v.s. 3.1% expected, 2.9% previous
  • U.K. Jobless Rate: 5.4% actual v.s. 5.5% expected, 5.5% previous
  • U.K. Claimant Count Change: 4.6K actual v.s. -2.2K expected, 1.2K previous
  • Euro Zone Industrial Production m/m: -0.5% as expected v.s. 0.8% previous
  • Credit Suisse ZEW Survey: 18.3 actual v.s. 9.7 previous
  • U.S. retail sales and PPI data coming up

Forex traders shunned the pound during yesterday’s morning London forex session. But today, they decided to shower the pound with some much-needed love, thanks to the U.K. jobless rate falling to the lowest level ever since mid-2008.

The U.K. jobs report was actually mixed in terms of meeting the market’s expectations or not, though. The average earnings index, for example, failed to meet the market’s expectations, but the current reading still managed to post a better reading when compared to the previous month.

Also, the details of the report mentioned that average total pay for employees increased by 58.6% between January 2000 and August 2015. CPI, meanwhile, increased by 39.4% during the same period, so clearly Britons are enjoying growth in real wages given that wage growth is beating inflation by a respectable margin.

Forex traders also probably shrugged off the disappointing reading for claimant count change, which saw an increase of 4.6K people claiming unemployment benefits, because the employment rate soared to 73.6%, which is the highest level ever recorded. Blimey!

GBP/USD is up by 87 pips (+0.57%) to 1.5366, GBP/JPY is up by 80 pips (+0.44%) to 183.67, GBP/CAD is up by 96 pips (+0.49%) to 1.9968

Aside from the pound, the only other major mover during the forex session was the Kiwi. The Kiwi was noticeably strong, which was rather weird since it was a predominantly risk-off session, with the DAX down by 0.50% to 9,982.80 and many commodities were being dragged into the red as well, so demand for the high-yielding Kiwi should have been dampened.

There weren’t any direct catalysts during the forex session that could have pumped up demand for the Kiwi, but some analysts pointed to continued Kiwi demand due to RBNZ Governor Graeme Wheeler’s lack of jawboning during his earlier speech.

And while Wheeler did say that “Some further easing in the OCR seems likely,” he also added that “we remain conscious of the impact that low interest rates can have on housing demand and its potential to feed into higher price inflation. It is important also to consider whether borrowing costs are constraining investment, and the need to have sufficient capacity to cut interest rates if the global economy slows significantly.”

Too long? Didn’t read? Well, the gist of what he was saying is that cutting rates may cause higher housing costs, which could discourage investment in the long-run. And many forex traders apparently took this as a sign that a rate cut would be highly unlikely in the upcoming meeting, fueling demand for the Kiwi in the process.

NZD/USD is up by 35 pips (+0.54%) to 0.6736, NZD/JPY is up by 32 pips (+0.41%) to 80.52, NZD/CHF is up by 26 pips (+0.41%) to 0.6434

The forex calendar for the upcoming afternoon London/morning U.S. session has heavy-hitters lined-up, so y’all better get your game face on.

At 1:30 pm GMT, forex traders will get data blitzed with the simultaneous release of the headline (0.2% expected, 0.2% previous) and core (-0.1% expected, 0.1% previous) readings for U.S. retail sales and headline (-0.2% expected, 0.0% previous) and core (0.1% expected, 0.3% previous) readings for U.S. PPI.

With regard to to retail sales, do note that the headline reading is expected to grow at the same rate as the previous reading while the core reading is expected to dip into negative territory, so be careful if you have open positions or orders on the Greenback. The balance seems to be tipped to the downside for the Greenback, though, since both readings for PPI are expected to deteriorate, which means that U.S. CPI may weaken in the near future.

Moving on, we’ll get the reading for U.S. business inventories (0.1% expected, 0.1% previous) at 3:00 pm GMT. Do note that business inventory levels are expected to increase at the same rate as last time, which could be bad news for the Greenback since the higher inventory levels could be due to lower demand for goods.

Then, at 7:00 pm GMT, we’ll be getting the U.S. Fed’s Beige Book as well as the U.S. Federal budget ($95.0B expected, -$64.4B previous). They’re both considered low to mid-tier items, though, so they don’t usually move the markets much. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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