Article Highlights

  • U.K. CPI y/y: -0.1% actual v.s. 0.0% expected, 0.0% previous
  • U.K. Core CPI y/y: 0.8% actual v.s. 1.0% expected, 1.0% previous
  • U.K. PPI Input m/m: 0.4% actual v.s. 0.8% expected, 0.4% previous
  • German ZEW Economic Sentiment: 41.9 actual v.s. 48.8 expected, 53.3 previous
  • Euro zone ZEW Economic Sentiment: 61.2 actual v.s. 62.4 expected, 64.8 previous
  • Euro zone CPI y/y: flat at 0.0% as expected
  • Euro zone Trade Balance: €19.7B actual v.s.€21.9B expected,€22.6B previous
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Lots of data, lots of news, and lots of volatility. Today’s morning London session was certainly exciting, especially if you’re bearish on the euro and the pound. Both currencies were severely weak for the session, with the pound being crushed by poor data and the euro being sent on a free-fall by news.

The euro opened the session with a majestic free-fall after two ECB officials said some rather disappointing things.

ECB executive board member Benoit Coeure said that the ECB is prepared to slightly increase asset purchases in May and June due to low market liqudity in July and August while ECB governing council member Christian Noyer frankly said that the ECB was ready to take further actions in order to reach its 2% inflation target. And in other news, European Commission President Jean-Claude Juncker said that there was no aid deal for Greece in the works at the meetings in Riga. Again, bad news for the euro.

With so many big time headlines from the ECB, it’s no surprise that the euro barely reacted to poor German and euro zone ZEW economic data. The euro even managed to find some support at the end of the session, likely on seller exhaustion/profit-taking and the euro zone still printing a trade surplus. A closer look shows that the surplus rose by 10.7B (3.4B previous) for Europe, and exports were also up by 14% y/y versus the 2% in February. As the saying goes: “don’t judge a book by its cover.”

EUR/USD is down by 87 pips (-0.77%) to 1.1211, EUR/NZD is down by 111 pips (-0.73%) to 1.5131, EUR/JPY is down by 96 pips (-0.70%) to 134.62

As for the pound, it also started the session weak, most likely due to currency correlation with the euro thanks to the close trade ties between the U.K. and the euro zone. But then the pound weakness accelerated as a barrage of disappointing data were released. The most likely market-movers was the U.K. consumer price index data, which saw both the headline and core read worse-than-expected. Is this the start of the BoE’s prediction that U.K. inflation would temporary dip into negative territory? Well, price action indicates that many traders seem to think so.

GBP/USD is down by 148 pips (-0.95%) to 1.5516, GBP/JPY is down by 162 pips (-0.86%) to 186.27, GBP/CAD is down by 135 pips (-0.70%) to 1.8891

The forex calendar for the afternoon London/morning U.S. session is much quieter than its European session counterpart with only a couple of mid-tier economic data points from the U.S. to hopefully keep the volatility going.

At 1:30 pm GMT, we’ll get U.S. building permits (1.06M expected vs. 1.04M previous) and U.S. housing starts (1.02M expected vs. 0.93M previous).  The U.S. dollar has already found some buyers thanks to euro weakness during the morning London session, but more Greenback buyers may come in because both housing indicators are expected to show an improvement over their respective, previous reads.

As a bonus, Bank of Canada Governor Stephen Poloz is scheduled to speak at the Chamber of Commerce in Charlottetown at 4:45 pm GMT. After that, Swiss National Bank Governing Board Vice-Chairman Jean Pierre Danthine has a speech in Geneva at 5:00 pm GMT.  It may be prudent for forex traders keep an ear out for any juicy tidbits, especially changes in economic or monetary policy sentiment. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together.

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