Article Highlights

  • German GFK Consumer Sentiment: 9.9 actual v.s. 10.1 expected, 10.1 previous
  • German Flash Manufacturing PMI: 53.2 actual v.s. 51.6 expected, 51.8 previous
  • German Flash Services PMI: 53.6 actual v.s. 53.7 expected, 53.8 previous
  • French Flash Manufacturing PMI: 48.6 actual v.s. 49.7 expected, 49.6 previous
  • French Flash Services PMI: 51.8 actual v.s. 52.0 expected, 52.0 previous
  • Euro Zone Flash Manufacturing PMI: 52.4 actual v.s. 52.2 expected, 52.4 previous
  • Euro Zone Flash Services PMI: 54.3 actual v.s. 54.0 expected, 54.0 previous
  • U.K. Public Borrowing: -£1.3B actual v.s. -£1.1B expected, £9.4B previous
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Despite being a Friday, today’s morning London forex session was surprisingly volatile. Even more surprising is the fact that the main movers were the Kiwi and the Aussie.

There were no direct catalysts that could account for the broad, overpowering strength that both the Kiwi and the Aussie showed during the forex session, with the Kiwi being the stronger of the two since AUD/NZD down by 28 pips (-0.26%) to 1.1005.

Some analysts were blaming the Greenback’s weakness due to forex traders paring their bets on a Fed rate hike, but I don’t buy it since both currencies were strong against all their forex rivals, and not just the Greenback.

I don’t think it’s end-of-week profit-taking either since most Kiwi pairs were slightly up for the week, although a case could probably be made for the Aussie since it was mostly weak during the week. Plus, the Chinese Caixin manufacturing PMI slipped from 47.8 to 47.1 earlier, which should be bad news for both economies.

It’s just a hunch, and I may be way off, but I think forex traders are pricing-in a possible Chinese intervention over the weekend due to the poor PMI data among others. And more forex traders are loading up on the Kiwi rather than the Aussie because of a string of good news for the Kiwi this week, such as the 14.8% jump in the GDT index and the 9.7% increase in credit card spending.

AUD/USD is up by 48 pips (+0.66%) to 0.7350, AUD/JPY is up by 31 pips (+0.35%) to 90.09, AUD/CAD is up by 47 pips (+0.49%) to 0.9608

NZD/USD is up by 58 pips (+0.89%) to 0.6678, NZD/CAD is up by 62 pips (+0.71%) to 0.8726, NZD/JPY is up by 49 pips (+0.61%) to 81.84

The pound was on the move too – to the downside. The pound was weak for the most of the forex session despite the surplus in public borrowing. Perhaps there was little love for the pound because the FTSE slumped by 1.22% to 6,290.50 during the session, and U.K. 10-year bond yields tightening by 2.15% to 1.726% certainly didn’t help to boost demand for the pound.

GBP/USD is down by 39 pips (-0.24%) to 1.5670, GBP/JPY is down by 85 pips (-0.44%) to 192.24, GBP/CAD is down by 66 pips (-0.32%) to 2.0501

As for the euro, it started the forex session weak, likely as a reaction to the poor reading for German GFK consumer sentiment. It could also have been a reaction to Greek Prime Minister Alexis Tsipras resignation, but I really, really doubt it. Although some investors were apparently worried that Greek reforms could be delayed, according to some analysts. In any case, the euro later found enough buyers to stay supported for the rest of the forex session shortly after the better-than-expected reading for German manufacturing PMI came out.

EUR/USD is up by 7 pips (+0.07%) to 1.1292, EUR/JPY is down by 34 pips (-0.25%) to 138.36, EUR/CAD is down by 10 pips (-0.06%) to 1.4660

The forex calendar for the upcoming afternoon London/morning U.S. session has a lot of heavy-hitting data points for the Loonie, so get ready.

At 1:30 pm GMT, we’ll get the headline (0.1% expected, 0.2% previous) and core (0.0% expected, 0.0% previous) readings for Canada’s CPI as well as the headline (0.2% expected, 1.0% previous) and core (0.5% expected, 0.9% previous) reading for Canada’s retail sales.

Do be extra careful if you are long on the Loonie since the headline readings for both CPI and retail sales as well as the core reading for retail sales are expected to deteriorate, which may convince Loonie bears to dive in should the actual reading come in as expected or worse.

After that, at 2:45 pm GMT, forex traders will get the reading for Uncle Sam’s flash manufacturing PMI (53.8 expected, 53.8 previous) followed by the reading for the euro zone’s flash consumer sentiment (-6.9 expected, -7.1 previous) at 3:00 pm GMT. Do note that the flash manufacturing PMI for the U.S. is expected to stay the same, so watch out if the actual reading comes in differently. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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