Article Highlights

  •  Italian Industrial Output (sa) m/m: 0.6% vs. 0.5% forecast, -0.7% previous
  • French Current Account: -€1.8B vs. -€0.2B previous
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Aussie and Kiwi selling continued in the morning London session, weak sentiment sparked by the broad weakness in Chinese data released in the morning Asia session (much lower trade surplus; both exports and imports fall short).  Because of their strong trade ties with China, the Asia comdolls tend to move on Chinese data, and in this case, to the downside as a decrease in Chinese demand means a decrease in their Australian and New Zealand exports. This weakness trend in China continues to support monetary policy easing speculation for both countries.

After a small bounce to .7615 ahead of the London open, AUD/USD took in more sell orders and pushed lower to nearly retest .7550 at its lows, now down around 100 pips (-1.32%) on the session. Kiwi bulls are feeling the pain as well with NZD/USD down 82 pips on the session (-1.1%) to .7434

The euro is lower on the session, ignoring slightly better-than-expected data from Italian industrial production, possibly on weak French current account data, or possibly a reaction to a report this weekend that Greece failed to provide an outline of structural reforms to euro zone officials. This of course adds to speculation that Greece will fail to earn more bailouts and time, and eventually default on their loans. This fear is putting the pressure on the euro against all of the majors, minus the understandably weak Aussie and Kiwi:

EUR/USD is down 72 pips (-0.70%) to 1.0524, EUR/GBP is down 27 pips (-0.38%) to .7210, and EUR/JPY is down 32 pips (-0.25%) to 127.01

With China and euro zone fears in focus, and no direct catalyst, forex traders seem to be flocking to the Greenback as a safe haven play from a potential shift from risk assets:

USD/JPY is up 48 pips (+0.40%) to 120.64,  USD/CHF is up 66 pips (+0.68%) to .9855, USD/CAD is up 75 pips (+0.60%) to 1.2641

The forex calendar for the Monday afternoon London/morning U.S. session is slow to start the week with only one U.S. data point, coming near the end of the Monday session.

At 7:00 pm GMT, we’ll get the monthly U.S. government budget balance report, forecast to show a deficit of -$43.4B vs. -$192.3B previously.  This is a mid-tier report that’s not usually closely watched by forex traders, but one to be aware of as a big swing in government spending can be a leading indicator of U.S. health; if the deficit continues to get bigger, that can influence the government’s willingness to spend more on the country or even increase a country’s debt problems.

Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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