London Session Forex Recap – Oct. 27, 2015

  • Swiss UBS consumption indicator: 1.65 v.s. 1.54 previous
  • Euro Zone M3 money supply y/y: 4.9% v.s. 5.0% expected, 4.9% previous
  • Euro Zone private loans y/y: 1.1% as expected v.s. 1.0% previous
  • U.K. index of services q/q: 0.9% v.s. 1.0% expected, 0.8% previous
  • U.K. preliminary Q3 GDP q/q: 0.5% v.s. 0.6% expected, 0.7% previous
  • U.K. preliminary Q3 GDP y/y: 2.3% v.s. 2.4% expected, 2.4% previous
  • U.S. durable goods orders coming up

The spotlight was on the pound during today’s morning London forex session, thanks to the preliminary reading for Q3 GDP. How did it turn out and what was the pound’s reaction?

Well, the preliminary ready for U.K. Q3 GDP was worse-than-expected, and the pound got a round of pounding as a result. Scanning through the report, production only increased by 0.3% in Q3, which is slower than the 0.7% increase during Q2.

Also, the risk-off sentiment probably didn’t help to pump up demand for the high-yielding pound, with the FTSEurofirst 300 down by 0.46% to 1,477.73 and the DAX down by 0.40% to 10,758.30 during the forex session. Nonetheless, most pound pairs later found enough buyers to stop a selloff.

GBP/USD is down by 17 pips (-0.11%) to 1.5333 with 1.5301 as session low, GBP/NZD is down by 53 pips (-0.23%) to 2.2599 with 2.2565 as session low, GBP/AUD is down by 31 pips (-0.15%) to 2.1165 with 2.1113 as session low

One currency that did enjoy the risk aversion was the Japanese yen due to its status as a safe-haven currency. The Swissy is considered a safe-haven as well, but it got no love from forex traders despite an uptick in the UBS consumption indicator. Perhaps the Swiss National Bank was sneakily weakening the Swissy again?

USD/JPY is down by 31 pips (-0.26%) to 120.35, CHF/JPY is down by 62 pips (-0.51%) to 122.29, GBP/JPY is down by 69 pips (-0.37%) to 184.54

USD/CHF is up by 27 pips (+0.28%) to 0.9843, AUD/CHF is up by 22 pips (+0.31%) to 0.7130, NZD/CHF is up by 28 pips (+0.42%) to 0.6679

Another currency worth noting is the Kiwi since it was practically shrugging off the risk-off sentiment like a boss. There weren’t any direct catalysts during the forex session, but some analysts point to continued speculation that the RBNZ won’t be cutting rates this week.

It’s also possible that European forex traders were able to take a long, hard look at New Zealand’s trade data from earlier. And while the ginormous trade deficit looks kinda bad on the surface, it ain’t really all that bad since quarterly exports was up by 6.4%, with exports to China up by a healthy 8.6%.

The main reason for the wide trade gap was the 9.2% rise in quarterly imports due mainly to a 23% jump in capital goods, which are goods used to produce other goods and services such as factory equipment and commercial airplanes. And the rise in capital goods could mean potentially higher productivity in the future. Well, that’s my take at least.

NZD/USD is up by 12 pips (+0.18%) to 0.6789, NZD/CAD is up by 32 pips (+0.36%) to 0.8954, AUD/NZD is down by 28 pips (-0.27%) to 1.0666

As for the euro, it only had a couple of low-tier and mid-tier economic indicators during the forex session, so its price action was dictated mainly by opposing currency price action.

EUR/USD is up by 4 pips (+0.04%) to 1.1063, EUR/JPY is down by 35 pips (-0.27%) to 133.10, EUR/CHF is up by 29 pips (+0.28%) to 1.0886

The forex calendar for the upcoming afternoon London/morning U.S. session has a good mix of economic indicators coming up, so y’all better get ready.

Up first at 1:30 pm GMT, forex trades will be getting the headline (-1.5% expected, -2.0% previous) and core (0.0% expected, -0.2% previous) readings for durable goods orders. Both readings are expected to remain weak, but they’re also expected to print an improvement over their respective previous reading, so make sure to keep an eye on the Greenback’s forex price action since a better-than-expected reading may pump up demand for the Greenback given that U.S. industrial production has been slumping lately.

Next, at 2:00 pm GMT, we’ll be getting the U.S. S&P Case-Shiller HPI (5.1% expected, 5.0% previous). The consensus is that this housing indicator will tick higher, but it’s a low-tier item, though, so it usually doesn’t move the markets.

After that, the reading for Markit’s flash U.S. services PMI (55.3 expected, 55.1 previous) is scheduled for release at 2:45 pm GMT. Do note that it’s expected to print an improvement, which would complement the better-than-expected reading for Markit’s manufacturing PMI from last week and may even create some demand for the Greenback.

Shortly after that at 3:00 pm GMT, forex traders will get the simultaneous release of the U.S. CB consumer confidence index (103 expected, 103 previous) and the Richmond U.S. manufacturing index (-3 expected, -5 previous). Forex traders tend to focus on the CB consumer confidence index since it surveys around 5,000 households to gauge the level of, uh, consumer confidence in the United States.

Finally, we’ll get a central banker bonus round when BOC Deputy Governor Timothy Lane speaks at the CFA Society in Halifax at around 4:20 pm GMT. The text of his speech will be released 10-15 minutes ahead of the actual event, so make sure you grab a copy here when it comes out. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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