- Swiss CPI m/m: 0.2% actual v.s. 0.1% expected, -0.2% previous
- Swiss CPI y/y: -1.2% actual v.s. -1.3% expected, -1.1% previous
- Euro Zone Revised GDP q/q: no revision at 0.4%
- Euro Zone Revised GDP y/y: no revision at 1.0%
- U.K. Trade Balance: -8.56B actual v.s. -9.95B expected, -10.71B previous
It seems like today’s morning London session was driven primarily by the forex market’s inter-market relationships, namely to bonds and equities. Most pairs were on the move, but the euro, pound, and yen pairs stood out because they were moving in one general direction: up for the yen and down for both the euro and the pound. Let’s get right to it, shall we?
Dismal Chinese inflation data sent the Asian equity markets reeling, with the Nikkei down by 360.89 points (-1.76%) to 20,096.30 for the trading day. This capital outflow from Asian equities had to go somewhere, and it seems like investors deemed the yen as the investment to go to.
USD/JPY is down by 40 pips (-0.33%) to 123.99, AUD/JPY is down by 28 pips (-0.29%) to 95.18, CAD/JPY is down by 22 pips (-0.22%) to 100.05
Other investments that investors were looking at were bonds. U.K. 10-year bond yields are currently down 0.39% to 2.038%, indicating that investors have been really loading up. And in the pound’s case, capital flight to bonds probably also got a boost from the fears of instability caused by the new pro-Brexit group that I mentioned yesterday, which threatens to split apart the majority government under the Conservative Party. With regard to that particular news, there are now about 100 Conservative party MPs calling for a Brexit. Yesterday there were only about 50 or so. Not a good development at all. It was so bad that forex traders ignored the very optimistic reading for U.K. trade balance.
GBP/USD is down by 57 pips (-0.37%) to 1.5283, GBP/NZD is down by 135 pips (-0.63%) to 2.1440, GBP/JPY is down by 123 pips (-0.65%) to 189.65
The euro was also getting pummeled by high demand for bonds, with German 10-year bond yields currently down by 1.01% to 0.881%. In terms of economic data, there weren’t really any that were released during the forex session aside from the revised euro zone GDP, which actually showed no revision as expected. As for updates on the Greek drama, there were some minor reports that came out during the forex session, such as the news that Greece has finally submitted a new reform plan. There were also rumors of a possible bailout extension and that Greek proposal was not sufficient according to “officials.” But again, nothing really market-moving or overly pessimistic, so the euro’s weakness was probably due to the bond buying.
EUR/USD is down by 41 pips (-0.37%) to 1.1252, EUR/JPY is down by 92 pips (-0.66%) to 139.63, EUR/AUD is down by 73 pips (-0.50%) to 1.4646
The forex calendar for the upcoming afternoon London/morning U.S. session is pretty light, with only a couple of items lined up, so forex traders may be taking it easy (or not).
At 3:00 pm GMT, forex traders will get the U.S. JOLTS job openings (5.03M expected, 4.99M previous) and U.S. wholesale inventories (0.2% expected, 0.1% previous). They’re both usually non-movers, but they’re both expected to show an improvement, so forex traders may take the opportunity to jump on them since there’s nothing else on the calendar.
Do keep an eye on JOLTS job openings, though. Remember, last week’s NFP reading had a better-than-expected increase, and job openings usually act as a leading indicator for future employment data, so a dismal result may cause some Greenback weakness. And on that note, stay frosty!