Article Highlights

  • German Final CPI m/m: flat at 0.1% as expected
  • German Final HICP m/m: flat at 0.1% as expected
  • European Court of Justice rules in favor of ECB with regard to the OMT program
  • U.K. PPI Input m/m: -0.9% actual v.s. 0.6% expected, 1.4% previous
  • U.K. CPI y/y: as expected at 0.1% (-0.1% previous)
  • German ZEW Economic Sentiment: 31.5 actual v.s. 37.3 expected, 41.9 previous
  • German ZEW Current Conditions: 62.9 actual v.s. 63.0 expected, 65.7 previous
  • Euro Zone ZEW Economic Sentiment: 53.7 actual v.s. 60.3 expected, 61.2 previous
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Lots of data, some news, lots of volatility, and lots of movement. Today’s morning London session was certainly an interesting one, with the spotlight on the euro and the pound. Although it would probably be more accurate to characterize the pound’s price action as a roller-coaster ride rather than a rocket ship. The euro, though, was sinking like a stone.

The euro was strong when the German market opened, probably due to the German CPI (final) reading coming in as expected and also possibly to forex traders speculating on the upcoming European Court of Justice’s ruling on the 2012 Outright Monetary Transactions (OMT) program (a bond-buying plan which some critics say is a form of monetary financing of governments).

When the ruling came out that the European Court of Justice ruled in favor of the ECB, the euro suddenly took a plunge, likely on forex speculators unwinding their long positions (and possibly taking long-term short positions) who were betting that this ruling would close the door on more quantitative easing down the road. The euro then weakened further when German ZEW economic sentiment and current conditions, as well as the euro zone ZEW economic sentiment, posted disappointing reads.

EUR/USD is down by 64 pips (-0.56%) to 1.1248, EUR/JPY is down by 114 pips (-0.82%) to 138.68, EUR/GBP is down by 50 pips (-0.69%) to 0.7190

As for updates on the Greek drama, Greek Prime Minister Alexis Tsipras accused the creditors of “pillaging” Greece after he accused them of “looting” Greece yesterday. It’s not really a major update, but it certainly is interesting. French President Francois Hollande also decided to join in, telling Greece that time is running out for them. Again, not really market-moving, but it did make the forex session more interesting. Oh, there was also a report that euro zone leaders are planning an emergency summit on Sunday in order to discuss the Greek crisis.

Moving on, the pound got dragged down by the euro’s weakness and a round of bond-buying at the start of the forex session, but managed to find respite when the annualized CPI data moved back into positive territory, proving that the BOE was right. Remember, the BOE forecasted in the May inflation report that inflation would temporarily dip into the red before moving back up.

Unfortunately, it wasn’t enough to offset the earlier losses since most pound pairs ended the forex session low key. Perhaps the disappointing read for PPI input placed a cap on the pound’s gains, although the bond-buying session is a plausible reason too since U.K. 10-year bond yields are currently down by 1.09% to 2.002%.

GBP/USD is down by 23 pips (-0.15%) to 1.5597 from session low at 1.5540, GBP/AUD is down by 9 pips (-0.05%) to 2.0151 from session low at 2.0137, GBP/JPY is down by 38 pips (-0.20%) to 192.73 from session low at 192.05

The forex calendar for the upcoming afternoon London/morning U.S. session is relatively light, with only a few items on tap.

Forex traders will get a small data dump at 1:30 pm GMT with the readings for the U.S. building permits (1.10M expected, 1.14M previous), the U.S. housing starts (1.09M expected, 1.14M previous), and the Canadian foreign securities purchases (5.03B expected, 22.47B previous).

Do watch out for U.S. housing starts and building permits because they are both expected to decline amidst a rather healthy U.S. housing market. If the actual readings are within expectations or worse, then perhaps forex traders bearish on the Greenback will use that as an opportunity to go on the attack.

Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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