Article Highlights

  • French Preliminary GDP q/q: 0.3% as expected vs. 0.0% previous
  • German Preliminary GDP q/q: 0.3% as expected vs. 0.4% previous
  • Swiss PPI m/m: 0.2% vs. -0.2% expected, -0.1% previous
  • UK construction output m/m: -0.2% vs. 1.5% expected, -3.4% previous
  • Euro Zone flash GDP q/q: 0.3% vs. 0.4% expected, 0.4% previous
  • Euro Zone flash GDP y/y: 1.6% vs. 1.7% expected, 1.5% previous
  • Euro Zone trade balance: €20.1B vs. €19.3B expected, €19.0B previous
  • US retail sales coming up
  • US PPI readings on tap
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Up, down, and all around! Forex price action was rather choppy during today’s morning London, with Greenback weakness being the only clear theme.

Major Events:

German preliminary Q3 GDP estimate – The German economy grew by 0.3% in Q3 2015, meeting the market’s expectations. Unfortunately, that also means that the German economy expanded at a slower rate when compared to Q2’s 0.4%. According to Statistisches Bundesamt, the main driver for growth was the positive contribution from domestic final expenditure while the main drags were the decrease in gross fixed capital formation and “the increase in imports was markedly larger than that of exports.

UK construction outputConstruction output in the UK was expected to increase by 1.5% during the September period, but the actual reading printed a 0.2% decrease instead. On a more slightly upbeat note, the previous reading was upgraded from a painful 4.3% drop to a less painful 3.4% drop. Going back to the recent reading, the decline was apparently due to a 2.4% fall in all new work, with new work from the private sector (commercial) decreasing by 4.6%. However, this was mostly offset by a 3.8% increase in repair and maintenance.

Risk aversion prevailsRisk aversion was the dominant sentiment during the European session, with the pan-European FTSEurofirst 300 down by 1.10% to 1,453.91 and the DAX down by 0.93% to 10,682.00. Risk aversion was also threatening to spill over into the US session, with the S&P 500 futures down by 0.23% to 2,035.75 and NASDAQ futures down by 0.38% to 4,567.88 during the forex session.

Major Currency Movers:

USD – After a brief show of strength at the start of the forex session, the Greenback then rapidly lost strength pretty much across the board. There were no direct catalysts that could account for the sudden weakness, but it’s possible that forex traders were just unwinding their long positions ahead of the retail sales and PPI readings for later.

USD/JPY was down by 10 pips (-0.08%) to 122.57, USD/CHF was down by 13 pips (-0.13%) to 1.0006, USD/CAD was down by 21 pips (-0.16%) to 1.3272

EUR – The German economy is the largest in the euro zone, contributing nearly 30% to the entire euro zone economy. And since the Germany’s Q3 2015 GDP ticked lower, forex traders naturally became concerned and began selling the euro across the board.

The euro later found some support and even began moving higher, however, but the actual catalyst wasn’t crystal clear since it’s possible that later demand for the euro could have been due to risk aversion triggering capital flows from European equities to the low-yielding euro.

At the same time, it’s also possible that forex traders were taking some profits off the table when the flash GDP estimate for the entire euro zone came out since the euro got some buyers shortly after that report came out.

Finally, it’s possible that forex traders were just pricing-in the better-than-expected reading for the euro zone’s trade surplus.

EUR/USD was up by 12 pips (+0.11%) to 1.0790 with 1.0749 as session low, EUR/JPY was up by 5 pips (+0.04%) to 132.26 with 131.91 as session low, EUR/CHF was up by 4 pips (+0.04%) to 1.0804 with 1.0780 as session low

GBP – The pound jumped at the start of the forex session, but the bullish momentum quickly lost steam when UK construction output printed another decrease when it was expected to print an increase. This apparently sparked some concern among forex traders with regard to the UK construction industry and the economy as a whole since the main reason for the decline was the lack of new work.

GBP/JPY was down by 10 pips (-0.06%) to 186.51 with 186.97 as session high, GBP/CAD was down by 20 pips (-0.10%) to 2.0201 with 2.0253 as session high, GBP/CHF was down by 14 pips (-0.10%) to 1.5231 with 1.5296 as session high

Watch Out For:

  • US headline (0.3% expected, 0.1% previous) and core (0.4% expected, -0.3% previous) retail sales readings at 1:30 pm GMT
  • US headline (0.2% expected, -0.5% previous) and core (0.1% expected, -0.3% previous) PPI also at 1:30 pm GMT
  • The preliminary result for the University of Michigan’s consumer sentiment survey (91.5 expected, 90.0 previous) at 3:00 pm GMT

See also:

Asia Session Recap

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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