London Session Forex Recap – Nov. 5, 2015

  • Swiss consumer climate: -18 vs. -14 expected, -19 previous
  • German factory orders m/m: -1.7% vs. 1.1% expected, -1.8% previous
  • Halifax house price index: 1.1% vs. 0.7% expected, -0.9% previous
  • Swiss CPI m/m: 0.1% vs. 0.0% expected, 0.1% previous
  • Euro Zone retail PMI: 51.3 vs. 51.9 previous
  • Euro Zone retail sales: -0.1% vs. 0.2% expected, 0.0% previous
  • MPC meeting minutes: as expected, 8-1 vote to hold main rate
  • MPC meeting minutes: 9-0 vote to hold asset purchases at £375B/month

All eyes were on the pound during today’s morning London forex session, thanks to the so-called BOE Super Thursday. So what happened? How did the pound react? And were the other currencies just chillaxing the whole time?

Major Reports/Events:

Steady risk appetite – Today’s European session was another risk-on day, with the FTSEurofirst 300 up by 0.32% to 1,505.89 and the DAX up by a solid 0.95% to 10,946.50. US equity futures are also hinting at a possible spill-over into the US session, the S&P 500 Futures up by 0.42% to 2,103.50 and NASDAQ futures up by 0.31% to 4,724.25 during the forex session.

Lower ELA ceiling for Greek banks – The ECB lowered the ceiling on the emergency liquidity assistance (ELA) fund available to Greek banks from €86.9B to €86.0B. This is good news for the euro zone (and the euro) because this “move reflected an improvement in liquidity conditions in Greece’s banking sector,” according to Reuters.

ECB economic bulletin – The ECB economic bulletin reaffirmed what ECB President Mario Draghi said during the recent ECB press conference that “The degree of monetary policy accommodation will be re-examined at the December monetary policy meeting, when the new Eurosystem staff macroeconomic projections will be available.”

EC economic forecast – In its latest European Economic Forecast, the European Commission upgraded its growth forecast for the euro zone from 1.5% to 1.6%, but it also downgraded its 2016 forecast from 1.9% to 1.8%. What probably caught the eyes of forex traders, however, was the significant downgrade for 2016 inflation from 1.5% to just 1.0%. Meanwhile, the 2015 inflation outlook remains unchanged at the rather low 0.1%.

MPC meeting minutes – To sum it all up, it was rather dovish. According to the minutes, “The path for Bank Rate implied by market yields, on which the MPC’s projections are conditioned, has fallen and now embodies an even more gradual pace of tightening than at the time of the previous Report.” Also, the MPC members noted that there are “persistent disinflationary forces.” They also noted the “the dampening influence of sterling’s past appreciation on inflation is expected to be persistent,” but will diminish over time.

Major Currency Movers:

GBP – Most pound pairs were actually pretty calm during the forex trading session… until the MPC meeting minutes revealed a rather dovish message, that is. The pound fell long and hard across the board when the minutes finally came out. Ouch!

GBP/USD was down by 97 pips (-0.63%) to 1.5288, GBP/NZD was down by 262 pips (-1.14%) to 2.3070, GBP/CAD was down by 164 pips (-0.81%) to 2.0105

EUR – The euro jumped at the start of the session. The only available catalyst for the jump at the time was the ECB lowering the ELA ceiling for Greek banks that I discussed earlier. The euro’s gains later got capped, however, when the ECB released its economic bulletin. The euro then began giving back some of its gains shortly after the EC released its European Economic Forecast. But another wave of buyers then began to swamp the euro shortly after the MPC meeting minutes was released, especially the EUR/GBP pair.

EUR/USD was up by 42 pips (+0.39%) to 1.0877, EUR/JPY was up by 61 pips (+0.46%) to 132.59, EUR/GBP was up by 72 pips (+1.02%) to 0.7116

NZD – Kiwi pairs were climbing higher across the board during the forex session, which was rather weird since there were no direct catalysts that could account for the Kiwi’s strength. It’s possible that the Kiwi was getting some buyers due to the prevailing risk-on sentiment. After all, the Kiwi is considered a higher-yielding currency.

NZD/USD was up by 36 pips (+0.56%) to 0.6625, NZD/CAD was up by 31 pips (+0.36%) to 0.8713, NZD/JPY was up by 50 pips (+0.63%) to 80.75

Upcoming Reports/Events:

Forex Calendar - US Session

We’ve also got a couple of central banker speakers on the lineup for the upcoming session:

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!