Article Highlights

  • German HICP (Final) m/m inline with 0.5% forecast/previous; y/y inline with 0.1% forecast/previous
  • German CPI (Final) m/m inline with 0.5% forecast/previous; y/y inline with 0.3% forecast/previous
  • French HICP (Final) m/m: 0.7% vs. 0.8% forecast, 0.7% previous; y/y at -0.1% vs. 0.0% forecast, -0.3% previous
  • French CPI (Final) m/m inline 0.7% forecast/previous; y/y at 0.0% vs. 0.0% forecast, -0.3% previous
  • European Trade Balance: €22.0B vs. €22.0B forecast, €22.8B previous
  • European Central Bank decides to hold the deposit rate at -0.20%; holds the refinancing rate at 0.05%
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Busy London session for the forex markets so far with risk aversion the name of the game ahead of a potential volatile U.S. trading session.

The euro is once again seeing red leading up to and after the European Central Bank announces that they will keep the main interest rates as-is as expected by the markets. A part of that selling pressure may have come from commentary from an ECB official that the Greek Government is “simply impossible” to work with, and the expectation that Greece will default; it’s rumored that European officials are already drawing up contingency plans if Greece does default.

The reaction to the ECB statement was muted as expected since the real fireworks don’t usually happen until the ECB President Mario Draghi speaks at the following press conference coming at 1:30 pm GMT. The euro is broadly lower on the session with momentum still in favor of the bulls:

EUR/USD is down 67 pips (-0.64%) to 1.0583, EUR/GBP is down 39 pips (-0.55%) to .7166, and EUR/JPY is down 67 pips (-0.54%) to 126.50

The Japanese yen and the U.S. dollar are both in rally mode, likely on broad risk aversion starting to take over market sentiment.  With China releasing another disappointing data point today (Q1 GDP at 7.0% vs. 7.3% forecast/previous; the slowest in six years) and fears of a Greek default staring to capture currency trader’s focus, the markets started to turn lower right from the London open with higher-yielding currencies (specifically the Aussie on China news) taking a hit against the “safe havens.” Both currencies are up broadly on the session, but the rally seems to be fading as we head into a potentially volatile U.S. trading session.

AUD/JPY is down 29 pips (-0.33%) to 90.73, AUD/USD is down 38 pips (-0.50%) to .7586, and NZD/USD is down 9 pips (-0.11%) to .7508

Speaking of the Loonie, the sell off in Canada’s currency is the last move of note, likely on forex traders taking quick profits ahead of the Bank of Canada monetary policy decision, after the currency rallied along side oil’s move higher on the session (Crude Oil WTE up +0.60 (+1.13%).  The move may be on an potential increase in future demand and Iran calling OPEC to cut production by at least 5 percent.  After trading just under 1.2500 for most of the Wednesday session, USD/CAD has rallied to 1.2550, up 61 pips (+0.50%) on the day. CAD/JPY is down 34 pips (-0.35%) to 95.27, and CAD/CHF is down 12 pips (-0.16%) to .7769

The forex calendar for the Wednesday afternoon London/morning U.S. session is set to be action packed with a wide array of U.S. and Canadian economic data points, and a top tier events from central banks.

It all starts at 1:30 pm GMT with manufacturing sales data (0.3% forecast vs. -1.7% previous) from Canada, the Empire State survey (7.17 forecast vs. 6.9 previous) from the U.S., and the main focus of the hour, the ECB monetary policy press conference.  The ECB event has been a market mover in the past, so don’t relax just yet because the euro train can pick up speed very, very quickly when Draghi speaks.

At 2:15 pm GMT, we’ll get the capacity utilization and industrial production data from the U.S., a set of mid-tier events that will give us an updated read on how industrial resources are utilized and how much output has changed in the past month.  Again both are mid-tier events, so don’t expect much of a reaction from forex traders, especially with a top tier  laden calendar this morning.

The final set of events with strong volatility potential will come at 3:00 pm GMT, including the NAHB Builders survey for a fresh read on the U.S. housing sector, and most notably the Bank of Canada (BOC) monetary policy statement. The forecast for what the BOC may say is up in the air with recent data and oil prices showing some improvement but global inflation and growth seen slowing.  Whatever the case may be, be ready to adjust stops and maximize winners if volatility does pick up.

For the rest of the U.S. session, we’ll get the Federal Reserve Beige Book at 7:00 pm GMT and the Net Long-term TICS Flows data at 9:00 pm.  Both are low-tier events and they come out during the thin afternoon U.S. session, so it’s unlikely we’ll see volatility pick up but if it does, it should be swift in the low liquidity conditions.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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