Article Highlights

  • U.K. ILO Unemployment Rate: 5.7% vs. 5.8% forecast/previous
  • U.K. Claimant Count Change: -38.6K vs. -25K forecast, -35.8K previous
  • BOE Meeting Minutes Released: unanimous vote (9-0) in favor of holding monetary policy as-is
  • Swiss Credit Suisse ZEW Survey: -73 vs. -10.8 previous
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Forex volatility picked up during the morning London with Sterling as the main market mover thanks to important employment data from the U.K. Not only did we see a tick lower in the unemployment rate, but wages surged to 2.1% in December, bucking the declining wage trend and beating inflation. This supports sentiment on the U.K. that it is still in recovery mode and one of the strong economies among the majors.  The British pound is shot higher on the news to hit new highs among some of the majors, but the moves seems to be slowing as we head into U.S. trade:

GBP/USD is up 70 pips (+0.46%) to 1.5420, GBP/JPY is up 94 (+0.51%) to 183.95, and EUR/GBP is down 56 pips (-0.75%) to .7373

The U.S. dollar seems to be the other currency of choice, up against the most of the majors on the session.  We don’t see a direct catalyst for the move, which could mean it’s forex traders positioning themselves for positive rhetoric from the big event coming up later: FOMC meeting minutes.  Whatever the cause may be, the Greenback is starting to see strong momentum in its favor going into U.S. data from a sleep Asia session:

EUR/USD is down 38 pips (-0.33%) to 1.1371, USD/CAD is up 45 pips (0.32%) to 1.2430, USD/JPY is up 5 pips (+0.04%) to 119.22 after testing lows around 118.95

The forex calendar for the Wednesday afternoon London/morning U.S. session is pretty packed with mostly U.S. data from various sectors to keep volatility chugging along.

At 1:30 pm GMT, we’ll see housing starts, building permits, and producer price index data from the U.S., and wholesale sales data from Canada.  All are mid-tier events, but with declining global inflation as the main focus as of late, the producer price index number from the U.S. is likely to be the big potential market mover with a forecast of -0.4% vs. -0.3% previous on the headline number. Declining inflation is a trend that hasn’t escaped the U.S. it’s very likely we’ll see it dip and possibly a dip in the Greenback on the release if that’s the case.

At 2:15 pm GMT, we’ll get capacity utilization (79.9% forecast vs. 79.7%) and industrial production numbers (0.3% forecast vs. -0.1% previous), both forecasted to tick higher but likely to not cause much of a reaction as the main event of the session comes in the form of the FOMC meeting minutes at 7:00 pm GMT.

The markets are looking for the FOMC meeting minutes to focus on the “tightening bias” of the Committee and the inflation outlook for a gauge on when we may possibly see the Fed raise interest rates in the U.S. and at what pace.  It should be a short-term market mover for the Greenback unless we see a surprise, which could then lead to big moves across the entire financial market landscape.  Definitely stay frosty for that one!

See also:

Asia Session Recap

U.S. Session Recap

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