London Session Forex Recap – Oct. 29, 2015

  • Spanish flash CPI y/y: -0.7% v.s. -0.6% expected, -0.9% previous
  • German jobless rate: unchanged at 6.4% as expected
  • German unemployment change: -5K v.s. -4K expected, +2K previous
  • Euro Zone economic sentiment: 105.9 v.s. 105.1 expected, 105.6 previous
  • Euro Zone industrial sentiment: -2.0 v.s. -2.7 expected, -2.3 previous
  • Euro Zone consumer sentiment: unchanged at -7.7 as expected
  • U.S. Q3 2015 (advanced estimate) coming up

Today’s morning London forex session was a rather active one, thanks to an outbreak of risk aversion that spurred demand for some of the low-yielding currencies while putting the squeeze on most of the higher-yielding ones.

The prevailing risk-off sentiment was apparently due to the poor performance of European equities, which dragged the FTSEurofirst down by 0.30% to 1,480.38 during the forex session. The poor performance of European mining companies, in particular, also caused commodities to weaken broadly, with gold down by 1.51% to 1,158.30 per troy ounce.

Overall, not a happy day to be a high-yielding currency, but a glorious one for a low-yielding safe-haven currency like the Swissy, which was kicking butt and taking names throughout the trading session.

USD/CHF is down by 38 pips (0.37%) to 0.9887, EUR/CHF is down by 16 pips (-0.15%) to 1.0848, CAD/CHF is down by 33 pips (-0.44%) to 0.7487

Strangely enough, the other safe-havens didn’t do too well, with the Japanese yen and the Greenback both mixed but mostly weak for the session. One possible reason for the lack of demand for the yen is that forex traders are just avoiding the yen or unwinding their positions ahead of tommorow’s BOJ meeting. As for the Greenback, its overall weakness could have been due to profit-taking after the FOMC-induced rally, or it could have been due to pre-emptive positioning ahead of the advanced Q3 2015 GDP estimate for later.

USD/JPY is up by 15 pips (+0.13%) to 120.93, GBP/JPY is up by 131 pips (+0.17%) to 184.59, GBP/USD is up by 14 pips (+0.02%) to 1.5259

Moving on, the low-yielding euro got lots of love from forex traders, likely due to a slew of mostly positive data points during the session. Although we can’t really rule out the possibility that the euro’s strength was due to euro shorts taking some delicious profits off the table after the euro got hammered across the board due to the FOMC statement.

EUR/USD is up by 126 pips (+0.24%) to 1.0962, EUR/JPY is up by 145 pips (+0.35%) to 132.55, EUR/CAD is up by 143 pips (+0.30%) to 1.4488

As for the comdolls, they were feeling some bearish pressure due to the risk-off sentiment, with AUD/USD down by 20 pips (-0.29%) to 0.7092 and USD/CAD up by 11 pips (+0.08%) to 1.3218. The only exception was the Kiwi since it was actually pretty strong, even though there weren’t any catalysts that could account for the strength. Some analysts were pointing to China’s plans to scrap the one-child policy, though, reasoning that China will need lots of milk soon, so more demand for New Zealand milk. I kid you not.

NZD/USD is up by 125 pips (+0.38%) to 0.6702, NZD/JPY is up by 138 pips (+0.48%) to 81.03, NZD/CAD is up by 137 pips (+0.42%) to 0.8855

The forex calendar for the upcoming afternoon London/morning U.S. session is filled to the brim with economic indicators from all tiers, so I’ll just be pointing out the more important ones.

Okay, forex traders are gonna be data blitzed at 1:30 pm GMT, with the simultaneous release of Canada’s RMPI (1.2% expected, -6.6% previous) and IPPI (-0.1% expected, -0.3% previous) readings, together with Uncle Sam’s advanced Q3 2015 GDP estimate (1.6% expected, 3.9% previous), initial jobless claims (264K expected, 259K previous), advanced GDP price index (1.5% expected, 2.1% previous), and core PCE price index (1.4% expected, 1.9% previous).

Both Canadian data points are leading indicators for CPI, but forex traders tend to focus on the RMPI (raw materials price index) since the IPPI (industrial product price index) is only limited to the price of goods produced in Canada, while RMPI is broader. And on that note, the RMPI is expected to jump back into positive territory after three months of being in the red, which could potentially mean a turnaround in Canada’s negative CPI, so expect some demand for the Loonie, especially if the actual reading exceeds expectations.

As for the U.S. data points, the GDP reading is obviously the most likely market mover, so keep an eye on that since it’s expected to print a slower growth rate in Q3. And if you’re plannin’ to trade this event, make sure to check out Forex Gump’s 3 Things to Remember for the Advanced Q3 U.S. GDP.

Moving on, we’ll then get a central banker bonus round at 2:10 pm GMT when Atlanta Fed President Dennis Lockhart delivers a short speech at the Workforce Development Panel Discussion in Washington DC. Given the nature of the event and since we just had the FOMC statement, we probably won’t be hearing much about the future direction of monetary policy, but make sure to keep an ear out for any specifics on economic outlook, alright?

After that, forex traders will then get to see the reading for pending homes sales (+1.1 expected, -1.4% previous) in the United States. Do note that it’s expected to increase, which would be good for the U.S. and the Greenback since other housing market indicators have been mostly disappointing, with the number of building permits declining from 1.16M to 1.10M and the number of new home sales contracting by 11.5% to 467K in September. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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