London Session Forex Recap – Oct. 22, 2015

  • Spanish Jobless Rate: 21.2% actual v.s. 21.95 expected, 22.45 previous
  • U.K. Retail Sales m/m: 1.9% actual v.s. 0.4% expected, -0.7% previous
  • U.K. Retail Sales y/y: 6.5% actual v.s. 4.8% expected, 3.5% previous
  • U.K. Core Retail Sales y/y: 5.9% actual v.s. 4.7% expected, 3.2% previous
  • ECB maintains refinancing rate at 0.05% as expected
  • ECB maintains deposit rate at -0.2% as expected
  • ECB press conference coming up
  • Canadian retail sales data on tap

The euro and the pound were in focus during today’s morning London forex session, thanks to a number of top-tier events. As for the other currencies, they were mostly in Rangeville, although the Swissy was a clear exception.

Let’s start with the euro. The euro took a tumble at the start of the London session before spending the rest of the session in hibernation mode. The initial drop was likely due to pre-emptive positioning ahead of the ECB’s press conference since many analysts (and some ECB officials) have been saying that the ECB would likely be more open to further easing moves. And, as Forex Gump has pointed out, the euro zone’s negative headline CPI reading for September and poor economic readings from Germany are weighing-in on the euro and the ECB officials’ decision. And the prevailing risk-on sentiment probably didn’t help to attract buyers for the low-yielding euro as well, with the DAX up by 0.34% to 10,273.00 during the forex session.

EUR/USD is down by 26 pips (-0.23%) to 1.1313, EUR/JPY is down by 32 pips (-0.24%) to 135.46, EUR/GBP is down by 37 pips (-0.51%) to 0.7310

Moving on, pound pairs surged higher across the board when the U.K. printed stronger-than-expected readings in its retail sales report. The pound’s rally was quickly capped, however, probably because some analysts began pointing out that the jump in retail sales, which is the fastest monthly rate increase since December 2013, was partly due to higher food and beer sales courtesy of the Rugby World Cup, so the higher retail sales readings are probably not sustainable in the long term. And it was no consolation that the actual retail sales report had this to say: “Feedback from food stores suggests that some of the growth seen this period can be attributed to promotions centred around the Rugby World Cup.”

GBP/USD is up by 45 pips (+0.29%) to 1.5478, GBP/CAD is up by 47 pips (+0.23%) to 2.0303, GBP/JPY is up by 51 pips (+0.28%) to 185.30

As for the Swissy, it was broadly weak. And just like yesterday’s London forex session, there were no clear catalysts for the weakness, so I’m pointing to the usual suspect – the Swiss National Bank and its mandate to weaken the Swissy.

USD/CHF is up by 44 pips (+0.45%) to 0.9626, EUR/CHF is up by 24 pips (+0.23%) to 1.0891, GBP/CHF is up by 101 pips (+0.67%) to 1.489

The forex calendar for the upcoming afternoon London/morning U.S. session has heavy-hitting events and items on the lineup, so y’all better buckle up ’cause we could be in for some chop.

We’ll start with a bunch of top-tier items at 1:30 pm GMT. Get ready for the simultaneous release of Uncle Sam’s initial jobless claims (265K expected, 255K previous) and the headline (0.1% expected, 0.5% previous) and core (0.2% expected, 0.0% previous) readings for Canadian retail sales. Do note that Canada’s retail sales readings are conflicting since the headline reading is expected to deteriorate while the core reading is expected to improve, so keep an eye on how the Loonie reacts to the actual reading.

The ECB’s press conference is also scheduled for 1:30 pm GMT and, as I mentioned earlier, some analysts are expecting the ECB to be more open to further easing, so watch out for that if you have an open position or order on the euro. You can watch a live webcast here.

After those top-tier events, we’ll be getting a bunch of low-tier and mid-tier items, starting with the U.S. house price index (0.5% expected, 0.6% previous) at 2:00 pm GMT. Do note that it’s expected to tick lower, which could mean a slight slowdown in the U.S. housing market, so expect some selling pressure for the Greenback, especially if the actual reading comes in worse-than-expected.

Forex traders will then get a bundle of economic indicators at 3:00 pm GMT, with the release of the U.S. CB leading indicator (0.0% expected, 0.1% previous), the reading for U.S. existing home sales (5.39m expected, 5.31M previous), and consumer sentiment (-7.4 expected, -7.1 previous) in the euro zone.

The CB leading indicator is a composite of previously released indicators, so it usually doesn’t have an effect on the market, but do note that existing homes sales is expected to increase a bit, so make sure to keep tabs on the Greenback. As for consumer sentiment in the euro zone, it is expected to dip ever so slightly, which may or may not spark a reaction from the euro. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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  • Nelson Chin

    Any reason why GBP/USD goes downtrend the first few minutes after UK Retail Sales news released? I assume it would go uptrend

    • Pip Diddy

      Hi Nelson,

      GBP/USD actually went higher for about 5-10 minutes before going back down. As for the reason why it went down, I mentioned in the write-up that the better-than-expected retail sales reading was attributed to the Rugby World Cup, so the jump is likely not sustainable. Another probable reason is that forex traders who had preemptive positions (notice that GBP/USD was going up before the report) were taking some profit off the table by fading into the rally. Hope that helps!

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