London Session Forex Recap – July 27 2016

  • Swiss UBS consumption indicator: 1.34 vs. 1.25 previous
  • German GFK consumer sentiment: 10.0 vs. 9.9 expected, 10.1 previous
  • German import prices m/m: 0.5% vs. 0.6% expected, 0.9% previous
  • French INSEE consumer sentiment: 96 as expected vs. 97 previous
  • French PPI: 0.4% vs.0.3% previous
  • Euro Zone private loans y/y: 1.7% as expected, 1.6% previous
  • U.K. index of services m/m: -0.1% vs. 0.1% expected, 0.6% previous
  • U.K. Q2 GDP q/q: 0.6% vs. 0.5% expected, 0.4% previous
  • U.K. Q2 GDP y/y: 2.2% vs. 2.1% expected, 2.0% previous
  • U.K. CBI distributive sales: -14 vs. 1 expected, 4 previous
  • FOMC statement later

Both volatility and directional movement were in short supply during the morning London session, probably because forex traders were hunkering down ahead of the FOMC statement. The session wasn’t a complete snooze-fest, though, since there was some interesting price action on the pound.

Major Events/Reports:

Preliminary Q2 2016 U.K. GDP report – The Office for National Statistics (ONS) finally released its Q2 2016 GDP report earlier during the session, and the actual readings were able to beat both the consensus readings and their respective previous readings, with Q2 GDP growing by 0.6% quarter-on-quarter (0.5% expected, 0.4% previous) and 2.2% on an annual basis (2.1% expected, 2.0% previous).

Browsing through the details of the report, the slight pickup in growth was due to a rebound in production, which added 0.30% to quarter-on-quarter GDP growth (-0.05% previous). This was partially offset by the slower growth in services, though, with services having a positive contribution of around 0.37% (+0.50% previous).

Pre-FOMC risk-taking – Despite the looming FOMC statement, there was still some risk-taking activity during the morning London session, with the pan-European FTSEurofirst 300 up by 0.57% to 1,354.63, the blue-chip Euro Stoxx 50 up by 1.01% to 3,011.50, the U.K.’s FTSE 100 up by 0.62% to 6,766.00, and the DAX up by 0.86% to 10,336.00.

The risk-on mood also weighed down on the safe-haven gold since it was down by 0.12% to $1,326.75 per troy ounce, although the risk-friendly environment also buoyed U.S. equity futures, with S&P 500 futures index up by 0.19% to 2,167.25 and the Nasdaq futures index up by 0.83% to 4,702.38.

Market analysts generally attributed the risk-on vibes to risk sentiment spillover from the earlier Asian session after Japanese PM Shinzo Abe’s announcement of a massive $265 billion fiscal stimulus package also stoked speculation that the BOJ will match it with an equally large monetary stimulus.

Pre-FOMC inactivity – European equities and U.S. futures may have seen some volatility ahead of the FOMC statement, but that unfortunately didn’t carry over into the forex market since most pairs were either trading sideways in tight ranges or moving about with no clear direction. Such subdued price action in the forex market is par for the course ahead of top-tier events like the FOMC statement, though. But as I said in the introduction, it wasn’t a total snoozefest because the pound had some interesting price action.

By the way, Forex Gump has a written a quick write-up on the FOMC statement, and you can read about that here. And if you’re looking ahead for a possible post-FOMC catalyst, then check out Forex Gump’s trading guide for the advanced U.S. Q2 GDP here.

Major Currency Movers:

GBP – The pound was a bit mixed at the start of the session and ended the session also mixed. It did have some rather interesting price action, though.

It first got slammed by buy orders across the board when the U.K.’s GDP readings came in better-than-expected. However, the potential rally was quickly snuffed out, either because forex traders didn’t want to be too exposed ahead of the FOMC statement, or the more insightful traders knew there was no long-term play there, given that the upbeat preliminary report was subject to revision and it didn’t reflect the effects of the Brexit referendum yet. We’ll have to wait for Q3 GDP for that.

GBP/USD climbed to a high of 1.3143 then plunged to a low of 1.3072 and then closed the session 3 pips lower (-0.03%) at 1.3103, GBP/CAD climbed to a high of 1.7337 then plunged to a low of 1.72422 and then closed the session 25 pips lower (-0.15%) at 1.7280, GBP/CHF climbed to a high of 1.3055 then plunged to a low of 1.29862 and then closed the session 7 pip higher (+0.05%) at 1.3026

Watch Out For:

  • 12:30 pm GMT: Headline (-1.4% expected, -2.2% previous) and core (0.3% expected, -0.3% previous) readings for U.S. durable goods orders
  • 2:00 pm GMT: U.S. pending home sales (1.2% expected, -3.7% previous)
  • 6:00 pm GMT: FOMC rate decision and press statement (maintain Federal Funds Rate at 0.5% expected)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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