Article Highlights

  • German Flash Manufacturing PMI: 51.2 vs. 50.3 forecast, 49.5 previous; Services PMI 51.4 vs. 52.5 forecast, 52.1 previous
  • French Flash Manufacturing PMI: 47.9 vs. 48.6 previous; Services PMI 49.8 vs. 48.5 forecast, 47.9 previous
  • European Flash Services PMI: 51.9 vs. 51.5 forecast, 51.1 previous; Manufacturing PMI 50.8 vs. 50.5 forecast, 50.1
  • U.K. CPI y/y: 1% vs. 1.2% forecast, 1.3% previous
  • European ZEW economic sentiment: 31.8 vs. 11 previous
  • German ZEW economic sentiment: 34.9 vs. 20 forecast, 11.5 previous
  • European Trade Balance: 19.4B EUR vs. 18.4B EUR forecast, 17.9B EUR previous
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The morning London session was a busy one with forex traders pricing in news stories from several fronts, sparking some choppiness & strong moves in currencies.

Risk aversion is a big theme of the morning, sparked on a news combination of the collapse of the Russian rouble and China’s HSBC flash manufacturing PMI data pointing to industry contraction.  Both events have currency traders running to safe havens, in which the Japanese yen is the usual winner in risk aversion scenarios. USD/JPY broke below 116.00 to as low as 115.60, and CAD/JPY was the other big yen pair mover as oil’s drop continues to weigh heavily on the Canadian dollar. CAD/JPY broke below the 100.00 handle to reach as low as 99.20.

On a positive note, we saw European PMI and sentiment data beating expectations, a rare and welcome occurrence for euro bulls. While it looks like stimulus may start to be a positive affect for the euro zone, the data has not been kind throughout 2014, so this is not some turn around story just yet. But it does help support the recent bounce the euro has been seeing from 2014 lows.  The other market drivers do seem to take more precedence, but we are seeing the euro up on the session against some of the majors without big morning catalysts:

EUR/JPY is up 102 pips (+0.81%) to 1.2536, EUR/GBP is up 11 pips (+0.14%) to .7960, and  EUR/AUD is up 40 pips (+0.26%) to 1.5182

The forex calendar for the Tuesday afternoon London/morning U.S. session has a few mid-tier economic data points from both the U.S. and Canada to hopefully keep the currency markets moving in an already volatile session.

The majority comes in at 1:30 pm GMT, where we’ll see monthly manufacturing sales data from Canada (-0.3% forecast vs. 2.1% previous), and from the U.S. we’ll get housing sector data in the form of housing starts (1.04M forecast vs. 1.01M previous) and building permits (1.07M forecast vs. 1.09M previous).  I suspect the Canadian data to be the market mover of the group given the volatility it’s seen recently thanks to the drop in oil.

And at 2:45 pm GMT, we’ll get the U.S. flash manufacturing PMI data (55.2 forecast vs. 54.8 previous). This is a low tier event so I don’t expect much reaction to the data point as the market will likely continue to focus on the current fears sparked in Asia, as well as getting ready for tomorrow’s FOMC monetary policy decision to notice.

See also:

Asia Session Recap

U.S. Session Recap

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