Article Highlights

  • German Retail Sales m/m: -2.3% vs. 0.5% forecast, -0.1% previous; y/y at 3.5% vs. 3.1% forecast, 3.3% previous
  • Swiss KOF Leading Indicator: 89.5 vs. 91.5 forecast, 90.9 previous
  • German Unemployment Rate inline with 6.4% forecast/previous
  • German Unemployment Change: -8K vs. -15K forecast, -14K previous
  • European Unemployment Rate: 11.3% vs. 11.2% forecast, 11.3% previous
  • European Flash HICP core inline with 0.6% forecast/previous; headline at  vs. 0.1% previous
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The Australian dollar continued its drop in the morning London session, which likely started in Asia trade by the weak import and export price index data.  This could be fueling speculation that we will see a rate cut by the Reserve Bank of Australia next week, tipping the scale between arguments for a cut (low inflation) and to hold (strong housing market and recent slight improvement in unemployment).  Overall, it seems to me that London forex traders are pricing in a cut at the moment with the Aussie falling across the board, and momentum still strong going into U.S. trade:

AUD/USD is down 89 pips (-1.12%) to .7916, AUD/JPY is down 116 pips (-1.22%) to 94.12, and AUD/CAD is down 95 pips (-0.99%) to .9523

The other currency move of note is in the euro, higher on the session after a gusher of economic data from today’s calendar.  The data was mixed, but it’s likely the better-than-expected Spanish data (growth hits 7-year high) was the motivation for euro bulls to come out of hiding.  Also, the case can also be made for the general improvement in European data, signaling that we may be at the bottom and that the recent quantitative easing actions by the European Central Bank may be having a positive affect. Whatever the catalysts may actually be, the euro ran up quickly in the morning London session, but has since stabilized to hold onto gains going into the U.S. session:

EUR/USD is up 66 pips (+0.60%) to 1.1194, EUR/GBP is up 55 pips (+0.76%) to .7255, and EUR/AUD is up 247 pips (+1.78%) to 1.4135

For the rest of the majors, price action has been choppy.  While most of the major pairs did see a pick up in volatility, it’s been mostly sideways action with many currently trading right around where they started at the London open.

The forex calendar for the Thursday afternoon London/morning U.S. session is active, not only packing potential market movers from the U.S. but also potential heavy hitter events from Canada.

At 1:30 pm GMT, we’ll get the bulk of the U.S. data including personal income (0.2% forecast vs. 0.4% previous) and spending (0.5% forecast vs. 0.1% previous), initial weekly claims (290K forecast vs. 295K previous), and the core PCE Price Index (0.2% forecast vs. 0.1% previous). We’ll also get the big market mover for the Loonie today with the monthly read on Canadian GDP. The forecast is for this number to come inline with the previous read of -0.1%, which would be below the recent trend of positive monthly gains.

At 2:45 pm GMT, we’ll close out Thursday’s economic calendar with the Chicago PMI number. This is a fresh read on manufacturing conditions in the U.S., specifically the mid-west region around Chicago. The forecast is for an improvement to 50 vs. 46.3 previous, which would be a break from the trend lower since topping out at 66.2 back in October. This is a mid-tier data point, and without other catalysts, this could be a very short-term market mover for the Greenback if we see a big surprise.  Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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