Article Highlights

  • European HICP y/y: -0.3% vs. -0.3% forecast, -0.6% previous; core y/y at 0.7% vs 0.6% forecast/previous
  • German ZEW (Economic Sentiment): 54.8 vs. 59.4 forecast, 53 previous
  • German ZEW (Current Conditions): 55.1 vs. 52 forecast, 45.5 previous
  • European ZEW (Economic Sentiment): 62.4 vs. 52 previous
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Forex volatility picked up nicely during the morning London session and price action was pretty mixed with broad strength in the euro and franc, and weakness in the pound and U.S. dollar.

For the euro, our likely catalyst was the monthly ZEW economic survey data which came mixed but a positive surprise to the current conditions read for Germany and the broad European economic sentiment read. The rise could have been also attributed to the broad U.S. dollar we’re seeing this morning, possibly a continuation of yesterday’s disappointing U.S. economic data. The euro is still broadly higher on the session, but the topping out at current levels going into the U.S. trading session:

EUR/USD is up 36 pips (+0.34%) to 1.0601, EUR/JPY is up 38 pips (+0.30%) to 128.54, EUR/AUD is up 46 pips (+0.34%) to 1.3871

Again, the Greenback took a broad hit in the morning London session, and without a direct fresh catalyst, it’s likely Monday’s round of weak U.S. data may be dampening expectations of a hawkish FOMC statement tomorrow. But it looks like the move didn’t last long as the Greenback is making a comeback as we roll into the U.S. trading session, especially against the comdolls:

USD/CAD is up 20 pips (+0.16%) to 1.2790, NZD/USD is down 4 pips (-0.06%) to .7355, and USD/CHF is down 30 pips (-0.30%) to 1.0030

And the British pound is the final move of note in the morning London session, and without a direct catalyst for its weakness, speculation is that we’re seeing behavior and volatility typical during General Election years.  This year’s General Election isn’t until May 7, so we may continue to see “random” spikes in volatility like we saw today until then.  For now, Sterling is down on the session with momentum still in favor of the bears:

GBP/USD is down 71 pips (-0.48%) to 1.4753, GBP/JPY is down 99 pips (-0.55%) to 178.88, and GBP/AUD is down 99 pips (-0.52%)

The forex calendar for the Tuesday afternoon London/morning U.S. session is back to being a light one with only a few low-to-mid tier events in  the lineup.

At 12:30 pm GMT, we’ll get Canadian manufacturing sales (-1.2% forecast vs. 1.7% previous), and from the U.S. we’ll see a fresh read on the housing sector with housing starts (1.04M forecast vs. 1.07M previous) and building permits (1.07M forecast vs. 1.06M previous) data. Again, these aren’t top tier events, but the Canadian manufacturing sales data may have some potential for bringing up currency volatility, at least for the Loonie.

And don’t completely count out the U.S. data as potential catalysts as the housing market remains a closely watched measurement of U.S. economic health.  The data trend has been lower and disappointing forecasts recently, so we could see a continuation of today’s Greenback weakness if the data trends continue. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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