Article Highlights

  • China’s M2 Money Supply: 13.1% as expected v.s. 13.3% previous
  • New Chinese Yuan Loans: 1050B actual v.s. 900B expected, 810B previous
  • U.S. headline and core CPI readings coming up
  • New Zealand’s CPI later
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With no top-tier items on the docket, today’s morning London forex session was a relatively quiet one. However, the euro, the Kiwi, and the Japanese yen were clearly bustin’ the moves. So, how’d they do and what moved them?

Okay, let’s begin with the euro. The euro took a dive shortly after European Central Bank (ECB) Governing Council member Ewald Nowotny gave the opening remarks at a conference in Warsaw.

In his speech, Nowotny stated that the ECB will “clearly miss” its inflation target due to the “dramatic fall in the price of oil and raw materials.” He then added that the “ECB is using the monetary policy instruments available – but it is quite obvious that in the current macroeconomic situation additional sets of instruments are necessary.”

In short, Nowotny was saying that more stimulus is needed, which is probably why forex traders reacted by dumping the euro. I have to say, however, that Nowotny’s views aren’t shared by all ECB officials. ECB President Mario Draghi, for example, said in a recent speech that it’s not yet time for more easing. And in an even more recent speech, he even said that the ECB’s QE program is actually working better than expected, which is probably why the euro stabilized a bit after the initial drop.

EUR/USD is down by 44 pips (-0.39%) to 1.1433, EUR/AUD is down by 90 pips (-0.58%) to 1.5566, EUR/NZD is down by 145 pips (-0.86%) to 1.6636

Moving on, the Kiwi extended its gains into the European session despite a lack of direct catalysts. It’s possible that European forex traders were pricing-in Business NZ’s manufacturing index (55.4 current, 55.1 previous), which is currently at the highest level since February of this year. This probably added to the optimism brought about by RBNZ Governor Graeme Wheeler’s speech yesterday, which has been interpreted by some market analysts as a sign that a rate cut would be highly unlikely in the upcoming meeting, fueling demand for the Kiwi as a result.

NZD/USD is up by 32 pips (+0.48%) to 0.6871, NZD/CHF is up by 40 pips (+0.62%) to 0.6530, NZD/CAD is up by 35 pips (+0.41%) to 0.8857

As for the Japanese yen, it was getting a lot of love during the forex session, even though there weren’t any major news reports during the forex session. It was risk-on session, too, with the DAX up by a solid 1.57% to 10,071.80, so demand for the yen as a safe-haven currency was obviously not the answer. Some analysts pointed to U.S. dollar weakness, which is plausible, but it doesn’t really explain the yen’s broad strength, though.

USD/JPY is down by 58 pips (-0.49%) to 118.17, EUR/JPY is down by 121 pips (-0.89%) to 135.11, GBP/JPY is down by 94 pips (-0.51%) to 182.87

The forex calendar for the upcoming afternoon London/morning U.S. session has lots of top-tier and mid-tier items coming up, so y’all better get ready.

First up, at 1:30 pm GMT, we’ll get the headline (-0.2% expected, -0.1% previous) and core (0.1% expected, 0.1% previous) readings for U.S. CPI. Do note that headline CPI is expected to sink further into negative territory, so expect the Greenback to weaken a bit if the actual reading comes in as expected or worse since that may further crush the possibility of a rate hike within this year.

Also at 1:30 pm GMT, forex traders will be getting the number of unemployment claims (269K expected, 263K previous) in the U.S. as well as the reading for the Empire State manufacturing index (-7.3 expected, -14.7 previous). Both these indicators are expected to show some improvement, but most forex traders would probably be focusing on the CPI readings.

Next, at 3:00 pm GMT, we’ll be getting the reading for the Philadelphia Fed’s manufacturing index (-1.8 expected, -6.0 previous). Like the Empire State PMI reading, this one is expected to show some improvement, so keep an eye on the Greenback.

After that, at 3:30 pm GMT, New York Fed President William Dudley will be giving a speech in Washington DC, so make sure to tune-in for any juicy updates, alright?

Finally, way late into the U.S. session at around 10:45 pm GMT, we’ll be getting the reading for New Zealand’s CPI (0.2% expected, 0.4% previous). Do note that CPI is expected to print a slower increase. Perhaps this may finally cause the Kiwi’s rise to pause a bit, especially if the actual reading comes in worse-than-expected. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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