- U.K. CPI y/y: 1.3% vs. 1.2% forecast/previous; core CPI at 1.5% vs. 1.6% forecast, 1.5% previous
- German ZEW Economic sentiment: 11.5 vs. 0.5 forecast, -3.6 previous; Current conditions at 3.3 vs. 1.7 forecast, 3.2 previous
- European ZEW improves: 11 vs. 4.1 previous
Forex volatility picked up during the morning London session thanks to European ZEW sentiment data and reads on U.K. inflation.
The big mover of the Tuesday morning London session was the euro, finding buyers right from the open but picking up momentum after the ZEW economic sentiment survey data report. Both the broad European and German specific data showed that financial experts think that while fragile, economic conditions are stabilizing and the outlook is improving. It looks like that momentum may be short lived with euro pairs looking like they’re topping at the moment and pulling back, but still mostly up on the session:
EUR/USD is up 57 pips (+0.47%) to 1.2506, EUR/JPY is up 145.86 (+0.47%) to 145.85, and EUR/GBP is up 33 pips (+0.43%) to .7992
The British pound saw some action as well as the latest read on U.K. CPI showed a slight tick higher versus expectations and the previous read, which economists think could be a temporary bump higher by recreational spending and is likely to resume its trend lower. This is probably why the reaction from forex traders has been choppy and mostly has Sterling edging slightly lower on the session (with exception against the USD and AUD):
GBP/USD is up 9 pips (+0.05%) to 1.5646, GBP/JPY is down 5 pips (-0.03%) to 182.36, and GBP/CHF is down 66 pips (-0.44%) to 1.5022
The forex calendar for the Tuesday afternoon London/morning U.S. session may keep the volatility going with a pair of mid to top tier U.S. economic data.
At 1:30 pm GMT, we’ll get an inflation read from the U.S. in the form of the producer price index (-0.1% forecast/expected) and at 3:00 pm GMT read on the housing sector in the form of the NAHB Builders survey index (55 forecast vs. 54 previous). With inflation currently being a driving theme for most markets, the inflation data will be the one to watch as a catalyst for movement. Stay frosty!
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