London Session Forex Recap – Oct. 20, 2015

  • German PPI m/m: -0.4% actual v.s. -0.2% expected, -0.5% previous
  • German PPI y/y: -2.1% actual vs.s -1.8% expected, -1.7% previous
  • Swiss Trade Balance: 3.05B actual v.s. 2.51B expected, 2.87B previous
  • Euro Zone Current Account: 17.7B actual v.s. 20.1B expected, 25.6B previous

Only a few mid-tier economic reports were released during today’s morning London forex session, but market sentiment was also lending a helping hand to ensure a lively trading session, with the Swissy, the euro, and the Kiwi in focus.

Risk aversion was the name of the game during the forex session since European equities were retreating across the board, with the DAX down by 0.43% to 10,120.50, thanks to lingering concerns over China. The risk-off sentiment sent European forex traders fleeing to the sweet embrace of the lovely Swissy, which was also getting a major boost from the larger-than-expected trade surplus for Q3 2015. Apparently, forex traders didn’t seem to mind that the higher surplus was actually due to a larger contraction in imports, with imports contracting by 10% versus the 5% contraction in exports.

USD/CHF is down by 49 pips (-0.52%) to 0.9505, GBP/CHF is down by 74 pips (-0.50%) to 1.4713, AUD/CHF is down by 36 pips (-0.52%) to 0.6921

Another beneficiary of the risk-off sentiment was the low-yielding euro since some of the capital outflow from European equities were probably absorbed by the euro. And even though the euro zone’s current account balance failed to meet the market’s expectations, some analysts pointed out that it was solid enough to attract some buyers for the euro. And looking at the report in depth, it does seem a bit upbeat, with the “combined direct and portfolio investment” component recording an “increase of €9 billion in assets and a decrease of €24 billion in liabilities.”

EUR/USD is up by 52 pips (+0.46%) to 1.1381, EUR/JPY is up by 77 pips (+0.57%) to 136.14, EUR/GBP is up by 31 pips (+0.44%) to 0.7351

As for the Kiwi, it was mostly on the up and up, even though there weren’t really any direct catalysts during the forex session. There is an ongoing dairy auction, however, so it’s possible that forex traders were opening pre-emptive positions in the hopes that the auction will result in higher dairy prices again, which would be good news for New Zealand’s dairy industry.

NZD/USD is up by 34 pips (+0.51%) to 0.6840, NZD/JPY is up by 51 pips (+0.63%) to 81.84, NZD/CAD is up by 39 pips (+0.45%) to 0.8895

The forex calendar for the upcoming afternoon London/morning U.S. session has a good mix of economic reports and central banker speakers on tap.

We’ll begin at 1:30 pm GMT with the simultaneous release of the readings for the number of U.S. building permits (1.17M expected, 1.17M previous) and housing starts (1.14M expected, 1.13M previous). Do note that the former is expected to print the same figure as the previous reading while the latter is expected to decrease a bit, so watch out for any surprises and keep an eye on the Greenback’s price action, alright?

Also at 1:30 pm GMT, Canada is scheduled to post the reading for its wholesale sales (0.2% expected, 0.0% previous). Do note that it’s expected to increase, which could mean higher retail sales, and hence, stronger levels of consumer spending, so expect the Loonie to attract some buyers, especially if the actual reading meets or beats expectations.

After that, forex traders will be treated to a bunch of central banker speakers, so make sure to keep an ear out for any juicy updates with regard to monetary policy and/or economic outlook.

We’ll start at 2:00 pm GMT when New York Fed President William Dudley gives a speech at the U.S. Treasury Market Conference in New York. Shortly after that, at 2:15 pm GMT, Federal Reserve Governor Jerome Powell will be giving a speech in the same event.

Finally, at 4:00 pm GMT, Federal Reserve Chairperson Janet Yellen will deliver a brief speech at the Labor Hall of Honor Induction Ceremony in Washington DC. Given the nature of the event, we probably shouldn’t expect a lot. Still, the head of the Fed, herself, is giving a speech, so it’ll probably be worth it to listen-in.

Oh, as I said earlier, a dairy auction is currently underway, so make sure to keep an eye on the outcome since another positive reading may send the Kiwi higher while a dip into negative territory could potentially clip the Kiwi’s wings. 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.

In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis. Head on to Big Pippin’s Daily Chart Art for some pip-locking technical weeks!