- Swiss Trade Balance mixed: 2.45B CHF vs. 2.49B CHF forecast, 1.33B CHF previous
- U.K. Public Borrowing (ex. interventions): 11.8B GBP vs. 11.7B previous
We saw strong bearish movement from the euro in the morning London session, and a bullish turn in risk sentiment pushing the Japanese yen lower.
Probably the main driver of broad market price action is the report that the European Central Bank may consider buying corporate bonds to help restore the economy. The idea of potentially adding more easy money policies has forex traders selling the euro right from the London open, making many euro pairs hitting session lows after some steady gains during the Asia session:
EUR/USD is down 31 pips (-0.25%) to 1.2764, EUR/JPY is down 62 pips (-0.46%) to 136.22, and EUR/CAD is down 86 pips (-0.59%) to 1.4357
The potential for corporate bond buying by the ECB also had broad sentiment shift into risk taking mode, pushing capital out of safe haven and into higher-yielding assets. In forex, that tends to mean a weakening Japanese yen which is what we got, especially against the commodity currencies (which tend to do well when broad risk sentiment rises). After hitting lows on the session just ahead of the London open, the comdoll/yen pairs are back up in positive territory:
AUD/JPY is up 16 pips (+0.18%) to 94.05, CAD/JPY is up 13 pips (+0.14%) to 94.85 after hitting 94.35 lows, and NZD/JPY is up 10 pips (+0.12%) to 85.31 after hitting lows around 84.95
Finally, the U.K. public borrowing sector came out slightly higher than previous, but the market moving news was that the U.K. government deficit has actually increased year-over-year to 58M GBP between April and September rather than decreasing as the government promised. Forex traders went slightly bearish and the momentum lower still seems to be strong against the comdolls:
GBP/CAD is down 70 pips (-0.39%) to 1.8166, GBP/AUD is down 66 pips (-0.36%) to 1.8332, and GBP/NZD is down 63 pips (-0.31%) to 2.0215
The forex calendar for the Tuesday afternoon London/morning U.S. session is extremely light with only the U.S. existing home sales data coming out later at 3:00 pm GMT. The forecast is for an uptick to about 5.1M vs. 5.05M previously, which would be inline with the uptrend we’ve seen in 2014. This is a mid-tier event, so if it does spark a reaction, it may be short lived.
Besides that, the U.S. equity market is starting it’s earnings session this week, which may influence currency price action. And don’t forget the potential for the ECB to get into corporate bond buying as a potential driver for sentiment as U.S. traders now get a chance to price it in. Stay frosty!
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