After the rocky start during the early part of the week, market extended its favor for USD during Thursday as second version of Q2 2015 US GDP rallied by 3.7% against 2.3% initially estimated, fueling the US Dollar Index (I.USDX) towards a week’s high. However, the Gross Domestic Index (GDI) failed to signals strong numbers and capped big gains of the greenback. The EU, GBP and JPY weakened against majority of its counterparts as strong USD faded the demand of rest of the financial options. The equity markets also rallied with upbeat US numbers and receding tensions in China. Crude Oil prices rallied with the largest daily gains in more than six years, heading for first weekly gains in 11 weeks, ending the longest losing streak since 1986 while the Gold prices remained lackluster amid stronger greenback. Moreover, the commodity currencies, namely, AUD, CAD and NZD, also gained a bit with improvements over Chinese economic scenario.
During the early part of the day, Japanese details remained mixed with weaker inflation numbers and household spending favoring JPY decline while the lesser unemployment numbers and rising retail sales helped reducing the damage to safe haven currency.
For the rest of the day, CPI numbers from Germany and Spain, coupled with second estimate of UK GDP are likely to take the lead of the market movement while annual meeting of the world’s top central bankers at the Jackson Hole Economic Symposium in Wyoming is surely going to make an effect for the forex market volatility. Should the global leaders spread fears from developing world, mainly driven by China, and discusses a better delay for the Fed to hike their benchmark interest rate, the USD could liquidate some of its gains while the optimism by Fed Chair may add further fuel to the greenback’s recent upward trajectory.
Even after upbeat economics, that fueled the US Dollar index register first weekly positive closing in previous three, the greenback is heading for the monthly loss as US Fed policy makers are divided amongst the September rate hike after the Chinese moves recently rattled global market. The Euro region currency remained suppressed, though gained on a monthly basis as solution at Greece helped market players help buying the regional currency ahead of the crucial ECB meeting scheduled during the week. The GBP was also registered declines while the JPY is on its buying level as global uncertainty helped shoring the safe haven demand. Moreover, the commodity currencies, namely, AUD, NZD and CAD, witnessed considerable losses as their largest consumer China is facing pessimistic economic scenario. The Crude oil prices, which rallied during two days of the last week, again witness weakness with Chinese pessimism and stronger USD reducing the energy demand.
After the comments from global central bankers that they are waiting for US Fed rate hike and stayed prepared for it during the weekend, global markets again shored up the volatility that favored USD. Early during the Monday, Japanese Industrial Production unexpectedly fell in July by -0.6% against 0.1% expected expansion while the New Zealand ANZ Business Confidence plunged to the lowest since February 2009.
As the UK market is observing holiday today, German Retail Sales, EU Flash CPI and the US Chicago PMI are likely to take the market moves during the Monday while ECB and US NFP, coupled with the important PMI readings from UK and RBA meeting are likely to become week’s headlines. However, speculations concerning delay in Fed rate hike is likely to govern the USD moves should the NFP plunges below 200K mark while pessimistic economic scenario in ECB may damage the EUR. Hence, it would be in the best interst of the market players to keep tracking the global releases to better trade.
Having registered considerable gains during last week, the US Dollar plunged negative on Monday, closing the August with losses, as Chicago PMI missed the mark and ticked down to 54.7 against 54.7 consensus and prior. Moreover, the EU CPI matched consensus and prior of 0.2% mark, supporting the regional currency to register positive closing on the first day of the week while the JPY witnesses positive closing; moreover, the GBP adhered to negative closing against majority of its counterparts as close of UK markets favored some of the pound bears. The Crude Oil prices rallied for the third consecutive day on Monday closing as the EIA cut its U.S. output estimates and OPEC says it is ready to talk to others members about cutting output.
During the early part of the Tuesday, the Oil prices trimmed some of it recent gains as market players noticed that the decline in Manufacturing activities across the globe could dampen the energy demand while there were some risk averse trades who cashed out of the market after recent rally. The RBA stood pat with its current monetary policy even after signaling short-term weakness of the economy while the Chinese Manufacturing PMI, official and Caixin Final version, witnessed negative marks as the official Purchasing Managers’ Index (PMI) fell to 49.7, the weakest showing in three years while the private Caixin/Markit Final Manufacturing PMI marked 47.3 in August, the lowest since March 2009. The Japanese Final Manufacturing PMI stood at a seasonally adjusted 51.7 in August, below its preliminary reading of 51.9 but above a final 51.2 in July.
With the manufacturing details from China, US and Japan already out, market players would wait for the UK Manufacturing PMI, scheduled for later today that could provide considerable moves as the UK markets will be open after the extended weekend. Moreover, Canadian GDP and US ISM Manufacturing PMI, are some other details that could make the market players busy throughout the day. Considering the recent turmoil threatening the global manufacturing, coupled with Chinese weakness, crucial details scheduled during the week, would play an important role in determining the market moves. More importantly, NFP and ECB would be the eye catchers. Hence, take cautiously.
Concerns relating to the China’s slowdown will harm the global economy kept rolling on Tuesday when global manufacturing indices, mainly from US, UK and China, ticked down, spreading the across the board selling in equities and commodities, also pulling down the USD. US ISM Manufacturing plunged to the lowest level since June 2013 while UK Manufacturing PMI also declined below the previous and consensus mark. The Canadian Dollar couldn’t enjoy the higher GDP mark while weakness in New Zealand GDT price Index provided additional weakness to the NZD. The Crude prices closed in negative after the US stockpiled registered higher number and a plunge in global manufacturing hurt the energy demand. Moreover, the Gold price together with JPY extended their winning streak as supported by safe haven demand. The IMF head also said in a worried tone that the global expansion outlook is worse than it expected before two months.
During early Wednesday, the Australian GDP printed 0.2% growth number for Q2 2015 against 0.4% expected, signaling the slowest growth since 2013, favoring the extended decline on the part of the AUD that yesterday plunged to its six years low against USD. UK Construction PMI and the US ADP Non-Farm Employment Change, coupled with Factory Orders m/m, are likely to fuel additional volatility into the forex market for the rest of the day.
Considering the recent weakness in global manufacturing PMIs, optimism concerning the US also fades and it would be in the best interest of the trader to wait for the Friday’s NFP, the glimpse of which could be find in today’s ADP reading, prior to taking any big orders favoring/against USD.
Fed rates: 2015 still a reasonable call; Markets calling for further Yuan devaluation? Leave a reply On: 2 Sep 2015 Fed rates: 2015 still a reasonable call; Markets calling for further Yuan devaluation?
With the Chinese officials resorting to selling Treasury bonds in a bid to continue supporting their crumbling market, Marcus Ashworth believes this is taking a toll on their currency. Remaining pegged to the dollar is proving to be costly, so cutting rates and devaluing the Yuan is almost certainly the right move for China to make, but it may also be that the market has already accounted for a future move.
September unlikely, but 2015 still a reasonable call in interest rates
Moving away from the overuse of emerging monetary policies of recent years, the Federal Reserve are set on raising the US interest rate in the near future. Speculation still persists as, even though a September hike was the original call, it’s seemingly becoming less and less likely. Zak Mir believes that the Fed should make their move and get it over and done with, but Ashworth feels that the concern over the markets (particularly emerging economies) should not be a factor in the Fed’s decision.
Having witnessed two consecutive negative closing the greenback jumped on the positive side during its Wednesday trading sessions as US ADP number printed 190K mark against 204K expected and downwardly revised 177K prior and the Fed’s Beige Book signaled that economy expanded across most regions and industries in July and August. The greenback ignored weaker Factory order reading that lagged behind upward revision of prior 2.2% and the 0.8% forecast by printing 0.4% growth. Moreover, the pessimism ahead of today’s ECB kept helping the USD as a comparatively stronger economy that the EU. The ECB President, Mario Draghi, is expected to announce a downward revision to inflation forecast from what it said during June when the forecasters said 2015 inflation should come in at 0.3%, rising to 1.5% in 2016 and 1.8% in 2017. The JPY and Gold, considered being safe haven also declined yesterday as stronger USD, coupled with Chinese holidays till the next week start could help avoiding market uncertainty for the time being.
During the early part of the day, Australian Retail Sales unexpectedly fell for the first time in 14 months to -0.1% from +0.6% prior while separate report indicated better exports, which rose 2% in July and the trade deficit narrowed to A$2.46 billion ($1.73 billion) from a revised A$3.05 billion in June. The reading kept fetching down the AUD while the market players await today’s ECB meeting.
Other than the ECB, that is more likely to damage EUR, UK Services PMI, Trade balance details from US and Canada and the US ISM Non-Manufacturing PMI, are likely to provide considerable market moves during the rest of the day. As the market has again turned to risk off mode, the USD became favorable that was additionally helped by the ECB speculations. Should the ECB President fail to announce any such degradation to inflation and keep maintaining its hawkish tone, the EUR can witness a short-term pullback. While tomorrow’s US NFP will be crucial to determine September rate hike and could help the USD in a better way. Hence, it would be better to support short-term USD buying on the intraday basis.
Even with the Friday’s much awaited US labor market details’ failure to bring much clarity to the timing of the U.S. Federal Reserve’s interest rate hike, the US Dollar Index (I.USDX) registered another weekly advance as early week rises, mainly triggered by ECB, helped the greenback. The US NFP plunged to the lowest in five months while the jobless rate dropped to 5.1%, the lowest since April 2008; moreover, the average hourly earnings increased 0.3% from the prior month and 2.2% over the past year, and the length of the average workweek rose. The Euro kept witnessing the losses after the ECB downgraded its inflation forecasts and said they can extend the QE if needed while weaker PMIs pulled the GBP back. Prices of Gold and Crude Oil extended their prior declined due to strong dollar and pessimism over China that also negatively affected commodity currencies.
During early Monday, after the Chinese marker resumed followed four day holidays, the USD seems regaining its strength while commodity currencies triggered another declines. The US markets are observing Labor day holiday and will be closed during the day, providing lesser volatility while there isn’t major things from rest of the globe that could trigger increased liquidity and the market is likely to observe its old method, in favor of USD.
However, uncertainty triggered by the US labor market details could continue making markets on edge and can become a reason for the greenback to liquidate some of its strengths ahead of September 17 FOMC.
On Monday, when the US and Canadian markets were enjoying the labor day holiday, the USD witnessed a negative closing that stretched during early Tuesday as again erupted Chinese pessimism, mainly triggered by Trade details, favored the JPY as a safe haven buying. The Euro gained against some of its counterparts as greenback weakness proved to be counter-productive for the regional currency while the GBP captured a bit of strength after it plunged during last week. The Crude prices extended their declines, with 3.0% loss, as drop in Chinese shares coupled with record North Sea production added to global oversupply concerns.
During the early Tuesday, plunge in Chinese imports, -14.3% versus -8.6% in July, followed the foreign exchange reserves numbers that revealed accelerating outflows, fueling concerns that the worst is yet to come from China. The Japanese GDP shrank lesser than the initial forecast to -0.3% from -0.4% and 1.0% gain during previous quarter. Moreover, the Australian NAB Business Confidence ticked to the lowest level in a year to +1 while German Trade Surplus rallied to records.
Having witnessed volatile moves during the early part of the day, coupled with dearth of major economics during the rest of the day, markets are likely to continue trading against the greenback unless there are some strong negatives coming out of EUR of Japan that could help the USD. However, with absence of crucial economics, it wouldn’t be wise to keep selling the US Dollar, except the intraday small shorts, as next week’s FOMC will be crucial to give decisive moves to the US currency.
Even with no news on hand the US Dollar registered second consecutive daily decline on Tuesday as markets favored the safe havens and are afraid of the Fed’s denial to hike interest rate during its next week’s FOMC meeting. The Euro region currency gained due to the Germany trade details that signaled that German exports and imports hit record highs in value terms in July while the GBP also gained considerably against majority of its counterparts. Moreover, the commodity currencies remained a bit of relieved after a signal that Chinese state intervention to prop up the nation’s equities. Gains in some of the Asian markets, mainly driven by the Japanese markets that rallied due to Prime Minister Shinzo Abe’s pledge to lower the corporate tax rate, helped easing USD declines during early Wednesday. Crude oil prices remained a bit softer even after the Chinese pessimism seemed fading as global supply glut kept hurting the energy market.
On Wednesday, Australian Westpac Consumer Sentiment plunged negative to the lowest in three months and the Home Loans rose lesser than expected and prior. Japanese Consumer Confidence beat consensus and previous marks by matching the June highs of 41.7.
Today becomes an important day for CAD and NZD as both the central bankers, namely the BoC and the RBNZ, are likely to hold their monetary policy meeting. The RBNZ is expected to again cut its bench mark interest rate, third time this year, could provide considerable NZD decline while the BoC, though not likely to alter its monetary policy could become pessimistic due to the Crude price decline and may continue hurting CAD. Moreover, the UK Manufacturing Production, is also likely to provide a pullback to GBP’s recent up-move should the numbers fall behind 0.2% forecast and July mark. The USD is likely to gain today even without any details as the rest of the globe is expected to witness negative sessions; however, a surprise move by the RBNZ of not to cut interest rate and a hawkish comment of BoC, together with higher UK numbers, could provide considerable greenback damages to the market.
With the first during the week US details published on Wednesday, the US Dollar registered a daily positive closing after declining for straight two sessions during the early week days. The US JOLTS Job Openings rallied to the record high yesterday and helped the greenback while the Euro region currency struggled against majority of its counterparts with no major details to publish. The JPY was again a clear winner with safe haven buying while plunge UK Manufacturing Production drove down the GBP. Moreover, the USDCAD reversed from its short-term ascending trend-channel support even after no alteration to BoC’s current monetary policy, as expected, due to the fear of global weakness hurting commodity currency. The Crude oil prices also extended its declines after pessimism over Japan and China hurt the energy demand from largest Asian buyers.
During the early Thursday, the NZD was a big hit, lost nearly 2.0%, trading near the six year’s lows against USD after the RBNZ cut its benchmark interest rate for the third time this year and signaled further rate cuts to come if needed, indicating the reversal to all the four hikes practiced during 2014. Further, the Australian labor market details were mixed with Employment gaining by 17,400 from July form 5000 expected & 39,200 prior upward revision while unemployment rate matched 6.2% forecast; though, AUD gains were restricted by the plunge in Chinese PPI to the for the 42nd straight month. Moreover, JPY also witnessed a bit of weakness during the early part of the day after core machinery orders fell 3.6% in July and capital spending unexpectedly fell for a second straight month.
Having witnessed considerable volatility during Wednesday and early Thursday, BoE meeting and US jobless claims are the leftover for the rest of the day to take care of. Moreover, the market have started favoring USD and another good reading from US labor market, Jobless claims, would be off a trigger to USD upward trajectory. However, absence of major data points restricts the market players’ capacity to put strong bids on the greenback. Hence, being cautious is expected while trading USD.
Thursday became third negative day for the US Dollar, pushing it towards the weekly loss as off shore prices of Chinese Yuan rallied considerably against greenback in what is known to be a rare intervention by Chinese state banks. However, the plunge in USD was later capped by fewer Jobless Claims and expectations of rate hike during next week’s FOMC. The AUD was a show stopper as better job numbers and stronger Yuan helped the Aussie while GBP also registered gains after the BoE said recent Chinese turmoil won’t affect the UK economy and it sees inflation picking up around the end of the year. Moreover, the JPY lost against majority of its counterparts when Japanese ruling party lawmaker Kozo Yamamoto said that the Bank of Japan’s Oct. 30 policy meeting would be a “good opportunity” for further monetary easing and the NZD were hit badly after the RBNZ cut its interest rate and signal further more to come soon. Oil prices rallied to Thursday after the EIA showed gasoline demand hike while the Oil inventories registered lesser than forecast hike; however, the energy prices remained firm on early Friday after the Saudi Arabia sees no need for a producer summit to defend prices.
During early part of the day, Japanese manufacturers’ sentiment turned positive in the July-September quarter while market players are likely to look for the US PPI and UoM Consumer Sentiment, in order to determine the USD trades. Moreover, German CPI and UK Construction Output are some other options that could provide market liquidity. With the recent hike in AUD and a plunge in JPY, it would be nice to recent a correction during the later part of the day if the US details are better; however, weaker than expected numbers could magnify the greenback decline. Hence, it would be in the best interest of the traders to keep observing the market and don’t let any trades open for the next week which is going to be an epic one for Forex market.
Even with the weaker than expected Jobless Claims and a higher PPI, the US Dollar registered a weekly decline ahead of this week’s crucial FOMC that would trigger a big market move on how Fed policy makers respond to recent changes in US economy. Moreover, the Preliminary reading of UoM Consumer Sentiment plunged to the year’s low and provided additional chances for the greenback selling ahead of this week’s critical moves. The JPY gained against majority of its counterparts with global economic uncertainty helping safe haven demand while the Aussie, that has rallied considerably, trimmed some of its gains with downbeat Chinese Industrial Production and the Fixed Asset Investment details. The Crude prices, that gained some weights during last weekend due to declining US rig counts and positive comments from US EIA, also declined with weaker Chinese details. GBP also liquidated some of its gains even with hawkish comments from BoE meeting while the EUR remained fragile with lesser economics to track.
With the pessimistic start of the week by Chinese details, the focus again shifted from the Chinese strength to the damage it could provide to global economic markets. However, there are lesser details, except EU Industrial Production, Swiss PPI and Retail Sales, during the day to be released. Moreover, the FOMC is likely to dominate this week’s economic calendar. Should the US Fed opt for an interest rate hike, the first since 2006, there would be considerable USD strength and the rest of the market is likely shed its gains while the other way round will be too difficult for the greenback to survive.
From the market forecasts, it seems that there are fewer participants favoring an interest rate hike during the current meeting. However, a hawkish comment from Fed Chair, coupled with upbeat economic forecast and a signal for December rate hike would become helpful to reimburse its recent losses. Hence, it would be in the best interest of the market players to wait till the FOMC prior to take and big positions in any asset classes.
With the crucial FOMC coming closer and closer, global markets trading jittery fearing how they could cope up with such an interest rate hike and a stronger US Dollar. The US Dollar Index (I.USDX) registered a positive closing on Monday, making the Gold and Euro decline while the Crude oil prices extended its downward trajectory. The CHF also weakened, liquidating its earlier gains, as the PPI and Retail Sales printed pessimistic numbers. The GBP remained sideways while the commodity currencies, namely AUD, NZD and CAD refrained from much moves due to absence of any important details.
During the early part of the day, minutes of recent RBA meeting revealed that China’s slowdown magnified risks to global growth, indicating challenges for new Prime Minister Malcolm Turnbull while the BoJ, in its monetary policy refrained from altering their current monetary measures, as expected, and signaled that the economy will slowly capture the higher growth and inflation, making the JPY rally against majority of its counterparts. However, press conference by the BoJ Governor is still left pending and becomes important to determine further JPY moves.
Moreover, the UK CPI, ZEW economic sentiment indices from Germany and EUR, US Retail Sales, Empire Manufacturing and Industrial Production m/m, coupled with New-Zealand GDT Price Index, are some of the details that could continue fueling Forex market volatility during the rest of the day.
Given the market turbulence over the FOMC rate hike speculations, the USD is likely to continue trading sideways to positive ahead of Thursday’s decision; however, it won’t be wise to put the early call on buying USD as fewer speculations support an interest rate hike during this meeting and can make sharp correction in Greenback ahead of its December meeting, where in the central banks is more likely to alter its benchmark interest rate for the first time since 2006.
Thin trading volume and tension trades ahead of the crucial FOMC helped the US Dollar ignore weaker than expected Retail Sales, Empire Manufacturing and Industrial Production details on Tuesday. However, the greenback liquidated some of its previous gains on early Wednesday as Federal Reserve is scheduled to start its two-day monetary policy meeting and the CPI, important policy measure, to be released during the later of the day, is likely registering a decline in consumer prices, can make the policy makers delay much awaited interest rate hike. The GBP and the EUR witnessed weaker session due downbeat releases while the JPY gained a bit as BoJ refrained from signaling need for further monetary easing. The Crude prices also declined a bit even with lesser stockpile details as macro supply glut is likely to prevail.
During the early part of the day, New-Zealand GDT Prince Index rallied to the highest level in five years, providing a bit of strength to the Kiwi while pessimistic comments from the Reserve Bank of Australia Assistant Governor, Guy Debelle, controlled the AUD trades.
Even if the US CPI is likely to govern the forex moves during the day, UK labor market details, EU CPI, New-Zealand GDP and Canadian Manufacturing Sales are some of the second-tier economics that could continue fueling the market volatility. Given the recent flow of favoring USD, even with lesser volume, chances are higher that a positive CPI details would boost the greenback strength ahead of tomorrow’s FOMC; however, a weaker inflation gauge, as expected, could make the greenback loose majority of its recent gains. Moreover, there are lesser chances of witnessing much of the market moves as tension continue to restrict traders and hence it will be better not to take big positions ahead of the Fed meeting outcome.
Finally, with much awaited September FOMC meeting the market expectations of not hiking the interest rates, the US Dollar witnessed a knee jerk reaction and plunged against majority of its counterparts and Gold prices rallied to the highest levels in more than three weeks as concerns for gloomy global economic outlook helped spurring the safe haven demand of the yellow metal. In addition to putting an interest rate hike on hold, the Federal Reserve also lowered the inflation and growth forecasts for medium to longer-term and also cut down the interest rate projections, in its economic forecast report. Moreover, the Fed Chair, in her press conference following the interest rate decision announced that uncertainty over the global financial market, coupled with the lower expected path for inflation, have hindered the interest rate hike this time and could continue doing so. However, she didn’t negate the chances of interest rate hike during 2015 and wanted to see some more improvements in US labor market to practice first interest rate hike since 2006. The oil price extended its declines after majority of the OPEC members did respect the market share increase than to cut the crude supply in order to balance global energy prices.
Having witnessed dovish form of FOMC, the early day speech by RBA Governor signaled that the current interest rates are favoring tourism and other businesses, indicating longer term for interest rate change and helped providing a bit more strength to the AUD. During the rest of the day, Canadian CPI, EU Current Account and the BoE Quarterly Bulletin are some of the events that could continue fueling forex moves.
Even if the FOMC failed to alter its benchmark interest rate, as expected, the US Dollar is witnessing a bit of pullback and may reverse the recent looses in near-term as chances of the December rate hike are still higher and can continue fueling the greenback. Hence, it becomes a good level to buy the USD; however, one can wait till the weekend to get the global markets digest the recent news and then trigger the new trades.
Even with all the gloomy talks and a hold to much awaited interest rate lift-off, the US Dollar managed to complete the last week with a positive notes as some of the influential policy makers, in their public speeches, signaled that the rate hike in 2015 is still expected and the US is capable enough to boost the growth and Inflation soon. Moreover, comments from the Fed, during its statement after Thursday’s meeting, about the global economic sluggishness kept harming the major currencies during the rest of the week and carried the same trend on early Monday when some the ECB policy makers said that the central bank can do the necessary and the path of ECB and Fed monetary policy are likely to diverge and can become a reason for the central banker to stretch their QE. Moreover, one of the BoE policy maker signaled that the bank’s next monetary policy alteration will be on the interest rate cut rather than the otherwise, liquidating some of the major GBP gains earned during early last week. The Crude oil prices recovered a bit after the US rig counts declined for third consecutive week while the Dollars of Australia and New-Zealand extended declines on Chinese pessimism and increases commodity selling pressure.
During the early part of the day, the New-Zealand consumer confidence dropped to a three-year low while the GBP strengthened a bit due to three month high Right Move HPI number. Moreover, the Japanese markets are closed through Wednesday and the market attention is likely to respond to German PPI, Canadian Wholesale Sales and the US Existing Home Sales during the rest of the day.
Given the ephemeral reaction to the Fed’s inaction during last week, chances are higher that the bets favoring December rate hike could continue fueling the greenback during the short-to-medium term. However, final reading of US GDP, scheduled during the week, could become decisive in forecasting USD moves.
Even after witnessing a four month low US Existing Home Sales print, the US Dollar extended its Friday’s up-move on Monday as Federal Reserve Bank of Atlanta President, Dennis Lockhart, in his public speech favored the chances of Fed rate hike during the current year. The FOMC member is fourth regional Fed presidents that favored the interest rate hike during 2015 after the central bank refrained from any alteration in its monetary policy on Thursday, the other three were-- San Francisco’s John Williams, St. Louis’s James Bullard and Richmond’s Jeffrey Lacker. At the Europe, the ECB officials are going adversely as compared to Fed policy makers as they are loud mouthed in public speeches to support extended QE, providing further downside to the regional currency, EUR. The GBP strengthened against majority of its counterparts, except the USD, while the JPY kept declining with the holiday season till Wednesday end. Moreover, the commodity currencies were a bit mixed as a halt in commodity plunge helped them relax.
With the Australian HPI q/q rallying to the highest levels since May 2010, chances of the RBA’s next move will also be unchanged interest rates become stronger, providing a bit of strength to the AUD. During the rest of the day, Swiss Trade Balance, EU Consumer Confidence and the US Richmond Manufacturing Index, are some of the details that are left for publishing and could fuel the Forex volatility.
As the market have started favoring USD, backed by the expectations that the Fed would hike interest rates in December, speech by the Fed Chair, on Thursday, would become important. Given the central banker join hands with the recent speeches from Fed policy makers, together with the higher GDP number on Friday, chances of the USD’s near-term rally can’t be denied.
Even as the US Richmond Manufacturing Index plunged to the lowest levels since March 2015, the US Dollar registered considerable gains against majority of its counterparts as one more FOMC member, Federal Reserve Bank of Atlanta President, Dennis Lockhart, favored the interest rate hike during 2015 in his public speech. Rest of the currencies, except JPY, witnessed downside as fears emanating from weaker Chinese economy threatening the global growth spread pessimism and helped JPY as safe haven. However, Gold, which is also considered as a safe haven, also failed as stronger dollar curbed the yellow metal demand. Crude oil prices gained a bit as a much larger drawdown in API crude inventories helped easing a bit of supply glut.
Today, during early hours, China pumped another bad news into the global market with worst Flash Manufacturing PMI since March 2009, providing another stumble to commodity and commodity currencies, like AUD, NZD and CAD. There are many important details scheduled to be released during the rest of the day, including Flash Manufacturing PMIs from EU and Germany, Canadian Retail Sales and US Flash Manufacturing PMI. However, amongst all these, testimony by the ECB President will be the one that could catch major market attention. Should the Mario Draghi signals weakness in its economy and readiness to extend the QE, either in size or stretch the September 2016 timeline, EUR is likely to witness additional downside. However, a bold statement could make the regional currency recover some of its recent losses.
Moreover, the markets have favored USD only on basis of FOMC members’ comments and the economic data aren’t favoring the words. Hence, given the ability of the Fed Chair, during her public speech on Thursday in Amherst, Massachusetts, on “Inflation Dynamics and Monetary Policy,” that the central bank isn’t ready for 2015 rate hike, the greenback can plunge heavily. Hence, it is better to take the counted step in favor of USD and not to put the blind bets.
And the US Dollar registered its first daily decline on Wednesday. Yes, the greenback that was only surging against majority of its counterparts due to hawkish comments from the FOMC members favoring an interest rate hike this year went on negative on the third day of the week as market players remained worry of Fed Chair’s comment, scheduled during the rest of the day, while ECB President’s dissent for the need of immediate stimulus provided additional downside to the US currency. The Euro rallied against majority of its counterparts as the ECB President, in his testimony, said even if the recent scenario is threatening the Inflation and growth outlook, the central banks is need of some more time to decide on whether the economy actually needs some more of the QE or not. The JPY registered mixed gains, except falling against EUR and USD, as global uncertainty kept fueling the safe haven demand that also fueled the Gold prices. Moreover, the commodity currencies kept their declines running on the back of weaker Chinese data and some of the negatives as their own front. Crude prices also declined on the back of higher US crude inventories and weaker global manufacturing numbers hurting the energy demand.
During the early part of the day, New-Zealand Trade deficit rallied to the highest levels since November 2014 while weaker Japanese Industrial Production and All Industries Activity index provided a bit of pullback to the JPY.
With the recent pullback to the USD, today’s speech by the Fed Chair and the US Durable Goods Orders are likely to command the market volatility; moreover, German indices relating to Business and consumer confidences, together with amount of EU TLTRO, could become decisive to determine EUR moves. Should the Fed Chair repeats her diplomatic answer, the USD may find it hard to sustain and can extend yesterday’s decline while a confirmed tone of 2015 interest rate hike will flourish the USD gains.
With all the talks favoring an interest rate hike during 2015, by FOMC members and by the Fed Chair, coupled with higher than forecasted Q2 2015 GDP numbers, the US Dollar Index (I.USDX) registered one more week with positive closing. The Euro region currency remained fragile against majority of its counterparts even as the ECB President, in his testimony, mentioned that the central bank’s isn’t in need to alter its current monetary measures, including QE; though, it is always ready to act if needed. The GBP plunged heavily due to dovish comments from the Bank of England Deputy Governor Sir Jon Cunliffe, coupled with cautious tone of BoE Financial-Stability officials, concerning the disinflation threat emerging from global economy. The JPY also lost some of its grounds due to rising USD while the commodities, especially the Crude prices, kept their declines running as gloomier outlook from China spread the pessimism.
Recently, the UK think tank said the BoE is less likely to alter its interest rate anytime until the middle of 2016 as the slowdown in China and emerging markets spreads global disinflation pressure. Moreover, the IMF head also signaled to revise down its global growth forecast numbers in its global economic review announcement during the current week.
On Monday, public speeches by various FOMC members, together with the Personal Income – Spending details from US could continue dominating the market. However, the greenback is less likely to extend its recent advance as market players would wait for Friday’s labor market details to authenticate the recently hawkish comments from the Federal Reserve. Moreover, the GBP is likely to extend its downside as renewed threat of global disinflation and the dovish comments from BOE spokespersons may keep hurting the GBP. The Gold and JPY are likely continue extending their medium-term advance unless sharp rise by the USD which generally hurts both these safe havens.