Article Highlights

  • German HICP (Final) m/m inline with 0.1% previous reads
  • Swiss Retail Sales y/y: -1.2% vs. 0.3% previous
  • European HICP y/y: -0.1% vs. -0.1% forecast, -0.2% previous; core HICP y/y 0.7% vs. 0.8% forecast/previous
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The forex markets continue to look stable after yesterday’s SNB shock to the world, but there are a few currency moves of note during the morning London session without a fresh major catalyst.

First is the euro, weak right from the London open but finding some bullish legs going into the U.S. trading session.  Talk around the water cooler is with the SNB giving up on defending EUR/CHF, they expect the ECB to take quantitative easing action. At the very least, the SNB has stopped buying euros, which can obviously be bearish for the shared currency.

We also saw weaker European inflation data this morning, which of course fuels speculation that the ECB needs to act sooner rather than later to achieve its mandate of price stability. Price action is currently mixed among euro pairs with comdolls seeing weakness on the session:

EUR/USD is down 40 pips (-0.35%) to 1.1588, EUR/GBP is down 14 pips (-0.20%) to .7638, and EUR/AUD is down 22 pips (-0.15%) to 1.4122

The exception to comdolls weakness, likely on risk aversion sentiment, is the Australian dollar, up on the session against most of the majors. This may be due to residual sentiment from Asia where Australia posted a better than expected employment change and a dip in the unemployment rate to 6.1% vs. 6.3% previous. We could also be seeing a rush to Australian assets because of the higher interest rates and good liquidity.

AUD/JPY is up 26 pips (+0.28%) to 95.66, AUD/NZD is up 53 pips (+0.51%) to 1.0534, and AUD/CAD is up 51 pips (+0.53%) to .9872

And with the SNB event still fresh, risk aversion is still the name of the game and traders are flocking to U.S. assets for safety.  The Greenback is up on the session ahead of a key U.S. economic report:

USD/JPY is up 31 pips (+026%) to 116.43, USD/CHF is up 340 pips (+4.10%) to .8718

The forex calendar for the Friday afternoon London/morning U.S. session is has mid and top tier U.S. events to hopefully close out the week with more forex volatility.

At 1:30 pm GMT, we’ll get the latest read on U.S. inflation data with the monthly consumer price index numbers. The headline number is forecast to tick lower to -0.4% from -0.3% previous, while the core number (ex food and energy) is expected to remain inline with the 0.1% previous. Even with the Swiss franc as the main focus at the moment, inflation news is still an important part of the overall equation so these number should still provide a short term spark for the Greenback.

At 3:15 pm GMT, we’ll get U.S. capacity utilization (79.9 forecast vs. 80.1 previous) and industrial production data (-0.1% forecast vs. 1.3%).  If we do see weaker numbers as forecast and CPI disappoints, the Greenback could see its strength from earlier in the London session reversed.

Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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