Article Highlights

  • Spanish unemployment change: -27.1K vs. -10.3K expected, 82.3K previous
  • U.K. construction PMI: 55.3 vs. 58.6 expected, 58.8 previous
  • Euro Zone flash HICP y/y: 0.1% vs. 0.3% expected, 0.1% previous
  • Euro Zone flash core HICP y/y: 0.9% vs. 1.1% expected, 1.1% previous
  • Euro Zone flash PPI m/m: -0.3% vs. -0.4% expected, -0.4% previous
  • Euro Zone flash PPI y/y: -3.1% vs. -3.2% expected, -3.2% previous
  • BOC rate decision and statement coming up
  • U.S. Fed Head Yellen and other Fed officials have speeches for later
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Both the euro and the pound were in the hot seat during today’s morning London forex session, thanks to disappointing reports for the two currencies. Meanwhile, the Aussie was quitely sucking up buyers in the background.

Major Events:

UK construction PMI dropsMarkit’s November constuction PMI for the UK was a real disappointment to pound bulls since it unexpectedly dropped to a seven-month low of 55.3 due to residential building activity increasing “at the weakest pace since June 2013.” Markit’s PMI report also noted that employment levels in the construction sector grew at the slowest rate since September 2013. On a more upbeat note, 55% of the respondents were expecting business conditions to improve while only 5% were expecting further deterioration.

Poor inflation readings for the euro zone – The headline preliminary estimate for the euro zone’s harmonized index of consumer prices (HICP) for the November period was a bit of a disappointment since it only registered a 0.1% year-on-year increase instead of the +0.2% expected, but the previous reading was revised higher from 0.0% to 0.1%, so it wasn’t all that bad.

The core reading, meanwhile, was a real disappointment since it printed a 0.9% increase instead of 1.1%. According to eurostat’s inflation report, lower energy prices were less of a drag in November (-7.3% vs. -8.7% previous). However, both services (+1.1% vs. +1.3% previous) and non-energy industrial goods (+0.4% vs. +0.5% previous) increased at a slower rate, which is why the core inflation reading took a hit as well.

Major Currency Movers:

GBP – The pound was kicked lower across the board when Markit’s construction PMI report came out. True, it was still above the 50.0 mark, which means that the construction sector was still expanding, but forex traders were probably more concerned with the contents of the report.

Specifically, forex traders were probably thinking about the lower employment growth in the construction sector as well as lower demand for residential buildings since they hint at lower levels of consumer spending, and consumer spending has been the backbone of GDP growth in the UK. Also, the poor manufacturing PMI from yesterday was still probably weighing-in on the minds of forex traders.

GBP/USD was down 47 pips (-0.31%) to 1.5026, GBP/JPY was down 48 pips (-0.26%) to 185.02, GBP/CAD was down 46 pips (-0.23%) to 2.0098

EUR – Most euro pairs were pretty stable at the start of the forex session, but the rug was pulled from under them (figuratively speaking, of course) when the poor inflation readings for the euro area came out. Remember, ECB officials are already pretty open to further easing and a downtick, especially in core HICP, would only help to convince ECB officials that further easing may be necessary.

EUR/USD was down 29 pips (-0.28%) to 1.0596, EUR/CHF was down 21 pips (-0.20%) to 1.0876, EUR/AUD was down 62 pips (-0.43%) to 1.4457

AUD – The Aussie was quietly grinding ever higher throughout the forex session. There were no direct catalysts that can explain the demand for the Aussie, but it’s possible that European forex traders were pricing-in the better-than-expected readings for Australia’s Q3 GDP from earlier. Also, there was some risk-taking during the trading session, which could have attracted some buyers for the high-yielding Aussie.

AUD/USD was up by 15 pips (+0.20%) to 0.7331, AUD/CAD was up by 26 pips (+0.27%) to 0.9803, AUD/NZD was up by 34 pips (+0.31%) to 1.1010

Watch Out For:

  • 1:10 pm GMT: Atlanta Fed President Dennis Lockhart has a speech
  • 1:15 pm GMT: ADP employment survey (190k expected, 182K previous); leading indicator for NFP, check out Forex Gump’s Forex Trading Guide for the upcoming NFP report
  • 1:30 pm GMT: U.S. Fed Chairperson Janet Yellen will deliver a brief speech
  • 1:30 pm GMT: revised US labor costs (1.0% expected, 1.4% previous) and non-farm productivity (2.2% expected, 1.6% previous)
  • 3:00 pm GMT: BOC overnight rate decision and statement (expected to hold at 0.5%)
  • 3:30 pm GMT: U.S. crude oil inventories (-0.6M expected, 1.0M previous)
  • 5:25 pm GMT: U.S. Fed Chairperson Janet Yellen has another speech; will talk about her economic outlook
  • 8:40 pm GMT: San Francisco Fed President John Williams has a speech

See also:

Asia Session Forex Recap

U.S. Session Forex Recap

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