Article Highlights

  • German preliminary Q1 GDP q/q: 0.7% vs. 0.6% expected, 0.3% previous
  • German preliminary Q1 GDP y/y: 1.6% vs. 1.2% expected, 1.3% previous
  • German final HICP m/m: unchanged at -0.5% as expected
  • German final HICP y/y: unchanged at -0.3% as expected
  • U.K. construction output m/m: -3.6% vs. -3.2% expected, -0.9% previous
  • U.K. construction output y/y: -4.5% vs. -2.7% expected, -0.4% previous
  • Euro zone flash Q1 GDP q/q: downgraded to 0.5% vs. unchanged at 0.6% expected
  • Euro zone flash Q1 GDP y/y: downgraded to 1.5% vs. unchanged at 1.6% expected
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Volatility was in short supply during the morning London session, probably because forex traders were waiting for the U.S. retail sales report to be released (or they just don’t wanna trade during Friday the 13th). The risk-off sentiment sent some buyers to some of the safe-haven currencies and the lower-yielding euro, though.

Major Events/Reports:

Euro Zone flash Q1 GDP – Despite Germany’s preliminary Q1 GDP growing at a faster-than-expected pace (0.7% vs. 0.6% expected, 0.3% previous), the second estimate for Q1 GDP growth in the entire Euro Zone was actually revised lower to 0.5% quarter-on-quarter (0.6% originally) and 1.5% year-on-year (1.6% originally).

The 0.5% quarter-on-quarter expansion is still better than Q4 2015’s 0.3% growth, however, which is probably why forex traders didn’t seem to mind the downgrade, and euro pairs had a mixed performance during the session as a result.

Oil slides lower – Oil benchmarks were still in the red during the morning London session, with U.S. crude oil down by 1.16% to $46.16 per barrel and Brent blend crude oil down by 0.89% to $47.65 per barrel near the end of the session.

Market analysts pinned the blame for the continuing slide in oil prices to the Greenback’s recent strength, but reports that Russia won’t be joining an OPEC meeting scheduled for June 2 likely caused sentiment on oil to sour as well.

Risk aversion domination – Risk aversion was the dominant sentiment during the morning London session, with the pan-European FTSEurofirst 300 down by 0.40% to 1,302.73, the Euro Stoxx 50 down by 0.28% to 2,926.50, and the DAX down by 0.13% to 9,848.50 near the end of the session.

As for the safe-haven gold, it got enough buyers to push it 0.44% higher to $1,276.75 per troy ounce while U.S. equity futures were in the red, with the S&P 500 futures down by 0.30% to 2,052.5 and the Nasdaq futures down by 0.31% to 4,321.38.

Market analysts were pointing to several things, such as poor reports for several European companies and jitters ahead of the U.S. retail sales report. And the lower oil prices during the session also likely had a negative effect on risk sentiment as well.

Major Currency Movers:

EUR, USD & CHF – Trading conditions during the morning London session were rather tight, but the U.S. dollar, the euro, and the Swissy were noticeably gaining against their forex rivals, albeit at a grinding and/or choppy pace. The Greenback and the Swissy are considered safe-haven currencies while the euro is a lower-yielding currency, so they were all likely getting some demand because of the prevalence of risk aversion during the session.

Between the three, the Swissy was definitely the strongest while the dollar was the weakest, probably because forex traders didn’t want to be too exposed when the U.S. retail sales report is released. Speaking of that retail sales report, Forex Gump has a Forex Trading Guide for it, so read it here if you’re interested.

USD/CHF was down by 25 pips (-0.25%) to 0.9708, EUR/CHF was down by 19 pips (-0.18%) to 1.1020, AUD/CHF was down by 22 pips (-0.32%) to 0.7071

EUR/USD was up by 9 pips (+0.08%) to 1.1350, EUR/AUD was up by 21 pips (+0.13%) to 1.5579, EUR/CAD was up by 11 pips (+0.08%) to 1.4611

JPY – Despite being a safe-haven currency as well, the yen got no love from forex traders during the session, and even ended up losing to ALL its forex rivals. The lack of love for the Japanese yen was likely due to profit-taking in order to avoid weekend risk and jitters after BOJ Governor Kuroda said during the late Asian session that “There is no doubt that the BOJ has ample space for additional easing” in order to reach the BOJ’s inflation target.

In addition Kuroda warned that the BOJ “won’t hesitate taking additional easing steps if currency moves, overseas economic developments and other various factors that affect Japan’s economy make it difficult for us to achieve our price target.”

USD/JPY was up by 21 pips (+0.19%) to 108.81, CHF/JPY was up by 50 pips (+0.45%) to 112.07, EUR/JPY was up by 33 pips (+0.28%) to 123.51

Watch Out For:

  • 12:30 pm GMT: Headline (0.8% expected, -0.3% previous) and core (0.5% expected, 0.2% previous) readings for U.S. retail sales
  • 12:30 pm GMT: Headline (0.3% expected, -0.1% previous) and core (0.1% expected, -0.1% previous) readings for U.S. PPI
  • 12:30 pm GMT: MPC Member Martin Weale is scheduled to speak
  • 2:00 pm GMT: U.S. business inventories (0.2% expected, -0.1% previous)
  • 2:00 pm GMT: University of Michigan preliminary U.S. consumer sentiment (89.5 expected, 89.0 previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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