Many of us wouldn’t have thought that the Fed would smartly put the point for December rate hike in yesterdays’ FOMC and fueled the US Dollar. The Federal Reserve, during yesterday’s meeting, said that the economy keep growing at a moderate rate and chances of December rate hike are still on table, fueling the greenback. Moreover, the US central bank also removed the line that mentioned global economic pessimism is hurting the US economy, supporting the speculators who expect December rate hike. Moreover, the Euro remained mostly lower with disappointing German numbers while the Aussie, Kiwi and Loonie, namely the AUD, NZD and CAD respectively, maintained their downside. The Japanese Yen remained a bit more firm after an unexpected rise in Industrial Production tamed speculations that the BoJ will hint for further monetary easing during its Friday’s meeting.
On early Thursday, markets kept favoring the greenback while punishing the commodity currencies, mainly the AUD which seen the plunge in Iron-Ore price, its main export after the inflation mark registered declines, favoring chances of the rate cut during next week’s RBA meeting.
Having witnessed a good rise by the USD, German CPI, US GDP and Pending Home Sales, would continue fueling the global forex volatility while chances are higher that a bit up US GDP provide considerable rise to the greenback.
With lesser than expected US Q3 2015 growth numbers to 1.5% v/s 1.6% forecast & 3.9% prior, coupled with the steepest decline in pending home sales since January, the USD liquidated some of its early week gains during Thursday while better than expected German CPI and lesser Unemployment favored EUR. Moreover, the AUD and NZD stopped their early week declines on the back of profit booking moves and the JPY remained volatile ahead of BoJ meeting announcement. The Gold prices kept plunging and the Crude also witnessed downside as weaker US growth signals lesser energy demand and more supply glut.
On Friday, the Australian PPI rallied with the highest point since May, to 0.9%, while news that the Bank of Japan refrained from altering its present monetary policy, provided a bit of strength to the JPY. However, the BoJ’s preferred measure of inflation registered second consecutive negative mark and trimmed some of the JPY gains. The NZD also witnessed a bit of rise due to ANZ Business Confidence Index which turned positive for the first time in five months.
With the BoJ’s Kuroda left to speak for monetary policy and a details of economic outlook is still awaited, chances are higher that the JPY may liquidate some more of its gains while EU CPI, Canadian GDP and US Chicago PMI are likely to provide additional liquidity to the forex marker. As the Fed again favored December rate hike speculations, all the upcoming details are likely to gain higher weight and a bit more of disappointing data can provide magnified effect to the greenback. However, next week’s job details will become crucial to determine near-term USD moves.
Even if the FOMC strengthened the USD during mid-days of last week, slower than expected GDP growth and smallest gain in US Personal Spending in eight months erased the greenback strength and pulled it to the negative weekly closing. The Euro region currency was on a positive side as ECB President said, during his interview with Italy’s Il Sole 24 Ore published on Saturday, that recent words favoring QE extension can be used if the medium-term data points indicate economic weakness while the GBP remained firm with weaker economic growth number published during early weekdays. Moreover, the JPY strengthened against majority of its counterparts as BoJ refrained from adding further stimulus and the central bank Governor seemed hawkish even after downgrading the inflation forecast.
Chinese Manufacturing details, both from official reading and from Caixin PMI, kept on marking the below 50 level; however, a bit more improvement in Caixin Manufacturing PMI helped the AUD and NZD during the early part of Monday. A gauge reflecting Japanese manufacturing activity, also expanded at the fastest pace in a year during October and provided additional strength to the JPY.
Following the release of Manufacturing details from Japan and China, current week has many important events/releases that could continue fueling the Forex moves. Amongst them, US NFP, monetary policy meeting by the RBA and BoE’s quarterly Inflation report are likely gaining most of the market players’ attention.
Although recent dip in US GDP, coupled with weakness in Chinese Manufacturing PMIs, favors a bit more of delay in Fed rate hike, the US central banker’s revised economic model, that helped them utter December rate hike during recent meeting, can continue favoring USD bulls and a positive mark of the US NFP may boost greenback strength. For today, Manufacturing PMIs from UK and USA may generate headlines.
On Monday, following disappointment by Chinese Manufacturing PMIs during early weekdays, Manufacturing indices from US and UK surpassed their forecasts and favored their respective national currencies; though, Tuesday is a holiday in Japan and hence market players were more in no-trading mood, restricting the forex volatility. Moreover, with the new FOMC model, the consumer spending and equipment investment forecasts have been downgrades while the Atlanta Fed Governor is of the view that the US GDP may slow a bit more than the last week’s forecast of 1.5% Q-o-Q growth, making it difficult for the US Dollar to close on positive side. The Crude prices also witnessed a bit of pullback from its recent declines due to improvements in US and UK manufacturing numbers while Gold prices closed near the lowest levels in nearly a month due to rising expectations of December Fed rate hike.
During the early part of the day, monetary policy meeting by the Reserve Bank of Australia (RBA), one of the important events of the week, look place. The central bank refrained from altering its monetary policy and fueled the Aussie Dollar; however, the gains may find it difficult to rally as the economic forecasts are likely to get downward revision during its Friday’s monetary policy statement release and the central bank also left the doors open for further rate cuts.
Having witnessed the RBA decision, UK Construction PMI, US Factory Orders and New-Zealand Job numbers are likely to govern Tuesday’s forex moves. With the good start of the week by the US manufacturing numbers, an improvement into the Factory orders may help the US Dollar to increase a bit more; though major attention will be based on Friday’s labor market details and the Wednesday’s testimony by the Fed Chair.
Even after witnessing downbeat US Factory Orders, the USD rallied against majority of its counterparts, except AUD, GBP and NZD, due to stronger risk appetite from the investors, mainly backed by optimistic job expectations. The Euro registered declines as ECB President, in his speech at European Cultural Days 2015 event, reiterated that the December option for further monetary easing announcement is still on table while the AUD kept rallying as positive comments from the RBA, coupled with no rate cut, favored the Aussie. Moreover, the NZD remained weaker as second consecutive daily decline in dairy prices and a first quarterly fall by the employment in three years damaged the commodity currency. The Crude prices declined after a bit of pullback on Tuesday; though, supply disruptions from Libya and Brazil kept prices under check. Furthermore, the Gold prices slid to the lowest levels in a month as stronger USD and speculations for December rate hike force the cut in safe haven demand of yellow metal.
Wednesday became a positive day for China as the Caixin Services PMI rallied to the highest levels since July 2015 to 52.0 in October from September’s 14-month low of 50.5; also, the Xinhua news agency quoted Chinese premier Xi saying that the economy can fetch 7.0% mark over the next five year plan. Moreover, the Australian Retail Sales rose with the expected 0.4% and the Trade deficit shrank to the lowest level in six months.
For the rest of the day there are many important economic details that could continue fueling Forex volatility. Amongst them, UK Services PMI, US ADP number and Trade Balance details from US and Canada, US ISM Non-manufacturing PMI and Testimony by the Fed Chair could fetch the headlines. However, a word of December rate hike and stronger economic transition by the Federal Reserve Chair, in her Testimony, could be a fuel for the USD bulls.
As expected the Federal Reserve Chair, Janet Yellen, have helped the US Dollar extend its upward trajectory, enabling it to mark the highest levels last seen in August by kept favoring that the December rate hike is a live possibility. The same was confirmed by the New York Fed President, William Dudley, and provided further strength to the greenback; also, ISM Non-manufacturing rose to the three months’ high while the ADP number met expectations. The yellow metal was the worst affected due to the gains of USD as it plunged to the fresh lows of November while the JPY also remained lackluster as improved risk sentiment cut down safe haven demand of the Japanese currency. The AUD, NZD and CAD were on the downside as Chinese markets kept flashing weaker signals and consecutive six week’s crude inventory build hurt the energy prices, Canada’s main export. However, the GBP was a bit more stronger against the USD than the rest of its counterparts as the Services PMI beat consensus and forecast by rallying to two month’s high.
During the early part of the day, minutes of the recent meeting showed that majority of MPC members favored Governor’s decision; however, they were worried about the global economic slowdown and an impact of commodity declines on Asian economies. Moreover, German Factory orders printed a disappointed numbers and extended its three month old decline.
Being a “Super-Thursday” the Bank of England is likely to govern the market moves and the GBP will be too volatile. UK Deflation, dip in Core CPI and weaker GDP number increase the chances of the BoE to remain dovish on its inflation forecasts; though recent decline in inflation number was very much expected and job details keep favoring optimistic consensus relating to economic growth and inflation. Given the Governor’s hawkish tone relating to 2016 rate hike and/or optimistic forecasts from QIR, the GBP seems all set to register noticeable gains.
The ‘Super Thursday’ finally concluded by giving heavy losses to the GBP as the BoE cut its CPI forecast for H1 2017, also lowered down the GDP outlook as it now sees 2.7% growth this year v/s 2.8% forecast in August, & 2.5% in 2016 v/s 2.7% forecast in August. Moreover, the BoE Governor said that the central bank stands ready for QE extension and more monetary easing; though, he later turned the indication, during his interview with Bloomberg, that the UK economy is strong enough and British people may witness an interest rate hike by their central bank during 2016. The US Dollar, even after witnessing seven week high Jobless Claims, rallied against majority of its counterparts as disappointing BoE details, coupled with another contraction in German Factory Orders, favored the greenback demand ahead of today’s crucial NFP details. Moreover, the Crude and Gold prices were hurt by the USD rise while the commodity currencies, namely AUD, NZD and CAD, kept testing grounds.
With the RBA monetary statement starting crucial NFP day, the Australian central bank said that interest rate cuts and a weaker currency helps the economy at present, negating the immediate need of further rate cuts; however, it reduced the inflation and growth forecast for the economy. Moreover, Japanese leading indicator index ticked down to the lowest since June 2013 and seems pulling the JPY down.
During the rest of the day, UK Manufacturing Production, Canadian labor details and Building permits are likely intermediate details ahead/near to the US NFP and Unemployment rate. This time the US job numbers are likely to gain heavy attention as the Fed would have only one reading after this one to decide whether to go for interest rate hike or not. If the details are optimistic, chances of the greenback rallying can become strong while another weaker reading would provide considerable downside to the US Dollar.
Following upbeat outcomes of US labor market, announced on Friday, the US Dollar rallied considerably against majority of its counterparts strong job numbers after two months of dismal prints left little doubt about the U.S. labor market is back with a vengeance, favoring the December rate hike by the Federal Reserve. The Euro region currency remain lull with a strong USD and a rising speculations about the ECB’s QE; moreover, the European Commission cut its euro-area growth and inflation outlook for 2016 and provided additional damages to the regional currency. The GBP remained a bit more on the downside as Bank of England (BoE) reflected weaker inflation and growth outlook and said that the central bank is ready to extend the QE or cut rates if needed while the commodity currencies remained more on the downsides except the AUD which rallied as the RBA refrained from cutting interest rates. The commodity basket also remained weaker partly due to the stronger USD and rest due to the pessimism over China.
Having rallied during past week, the US Dollar held its gain stopped on Monday due to profit booking while negative news from China, in-terms of Trade Balance, gave reasons for some of the bears who expect a later Fed rate hike. Moreover, the AUD which gained during last week also shed some of its gains as Chinese exports slipped 6.9% in October from a year earlier, down for a fourth month, while imports fell 18.8%. The Japanese real wages also grew for fourth consecutive month and helped the JPY gains against majority of its counterparts.
While most major data points have been released during last week, the current week also has some of the important data points like, RBNZ, job details from AU and UK coupled with EU Flash GDP and US Retail Sales and PPI. On Monday, the economic calendar is mostly inactive with German Trade Balance and Canadian Housing starts being the details to be announced for the rest of the day. With the US job details giving another life to the speculators expecting December rate hike, coupled with hawkish comments from some of the FOMC members, keep favoring the USD; however, chances of pullback gets even brighter at this high prices if some of the US details print negative marks.
With the US Labor Market Conditions Index revising up its prior levels and printing an upbeat mark, the USD extended its last week’s up-move during Monday; however, the greenback seems taking a break on Tuesday with no major releases to observe during the rest of the week except on Friday when Retail Sales, PPI and UoM Consumer Sentiment Index can provide further guidance. The Euro remained in sidelines with German Trade Balance lesser surplus and the Portugal elections disturbing the regional economy while GBP kept trading waters with the aftershocks of BoE’s pessimistic QIR released last week. The JPY remained a bit firm after losing considerable during last week while commodity currencies maintained their declines as Chinese pessimism witnessed another bad news, after yesterday’s Trade balance details, wherein the consumer inflation moderated more than expected in October, indicating persistent deflationary pressure in the world’s second-largest economy. Moreover, the Crude prices also kept running down with signs of fresh US crude inventory buildup.
As compared to the Monday’s dull trading session, there are some events that could fuel forex volatility on Tuesday as RBNZ Financial Stability Report and the US Import Price Index are scheduled for release during the rest of the Tuesday.
Considering the recent tantrum of higher risk appetite by the investors, mainly triggered by renewed Fed rate hike speculations, the USD is more likely to extend its recent gains; however, comments from the RBNZ Governor, during his speech in post Financial Stability Report publish, becomes important to determine near-term NZD moves. Should the Governor focuses more on the weaker Dairy prices and Chinese pessimism and signals further rate cuts by the central bank is near-future, the NZD is bound to witness considerable downside.
Last week, the deadly attacks in Paris shackled the global financial markets on Friday as market players afraid for their financial assets and sought USD as a stronger one to buy; however, the said news could fuel the greenback rally as slower than expected rise in US Retail Sales and another negative reading by the monthly PPI number failed to bolster the investor sentiment regarding December rate hike and pulled the US Dollar Index (I.USDX) to negative weekly closing. The Euro remained mostly fragile as downbeat GDP and Paris attacks, coupled with another dovish tone by the ECB President, kept forcing the Euro players towards exiting the regional currency; though, uncertainty in the market helped limiting major downside of the Euro. Further, the GBP was a clear winner during last week as the Unemployment Rate plunged to the lowest levels since July 2008 while the JPY also gained considerably with the support gained from safe-haven demand. Moreover, the Crude oil prices stretched its decline and marked biggest weekly loss in eight months, dropping 8% on the week for their worst performance since March as U.S. oil rig count in 11 weeks, while the International Energy Agency (IEA) said there was a record 3 billion barrels of crude and oil products in tanks worldwide.
During the early weekdays, New-Zealand Retail Sales surpassed consensus and prior while the Japanese GDP confirmed recession with third consecutive negative print and damaged JPY. Moving on, the Monday started a good day for the greenback traders due to its risk-free status and speculations of December rate hike during these uncertain market conditions. Though, EUR kept running its decline with expectations that the recent attacks could provide magnified damages to the regional economy and may push the ECB towards further monetary easing.
With the renewed geo-political tensions, market is again favoring the US Dollar as it is the only currency that is strongly expected to witness a December rate hike while majority of the global central bankers are in mood to ease their monetary policy measures. However, today’s Final reading of EU CPI and this week’s inflation numbers from UK and US are likely to mark headlines of the week while FOMC meeting minutes and BoJ meeting would be crucial to observe.
Even after witnessing higher than expected plunge in US Empire State Manufacturing Index, the US Dollar kept its advance running as the aftershocks of Paris attacks favored safe-haven demand of the greenback; however, the JPY couldn’t enjoy the safe-haven demand gains as negative GDP reading kept favoring another monetary easing session by the Japanese central bank. The Euro region currency remained a bit more firm as Greece managed to get an aid package agreement of additional monetary help from European authorities; though, ECB board member, Peter Praet, said that the central bank sees risk that investors and consumers will lose faith in policy makers’ projections for reviving inflation and damaged the Euro during early Tuesday.
Moving on, Crude Oil prices trimmed its Monday gains as the supply glut fears superseded risk premium following Paris attacks and French air strikes in Syria. Moreover, the New-Zealand Inflation expectations remained as prior 1.9% mark and magnified the NZD downside while comments from the Chinese commerce ministry that the external trade situation in China has become more severe this year from 2014 and the sector is facing increasing downward pressure triggered another decline of the commodity currencies.
During the rest of the day, Inflation numbers from UK and US, coupled with ZEW Economic Sentiment for EU and Germany, are likely to fuel market volatility. There are brighter chances that the UK CPI would continue its downward trajectory and may hurt the GBP while an improvement in US CPI may help USD regain its strong run.
On Tuesday, the US Dollar Index (I.USDX) extended its march to the highest levels in more than seven months as CPI rose to the highest levels in four months by reversing prior declines, favoring speculations that the Federal Reserve might find it easier to lift benchmark interest rate during its December meeting. The said optimism for USD adversely affected the EUR which also went down due to renewed threat of another bomb scare in Europe and gunfire in the French capital. Further, the JPY was on its southward journey ahead of the crucial BoJ which is likely to indicate the need of further monetary easing while the commodity currencies, namely AUD, CAD and NZD, kept trading down with a plunge in Copper and Gold prices; however, the Crude witnessed profit booking due to expected cut in US stockpiles and higher refinery runs.
For Wednesday, US again likely to be in the limelight as minutes of its October meeting is scheduled for release during the later part of the day. As the meeting wasn’t followed by the Fed Chair’s press conference, market players are likely to concentrate more on the details to look for December rate hike signals, should there be any hints relating to that, which is more likely, USD would be on rally.
Moreover, Euro is more likely to continue its downward trajectory with no major releases left for publish while the JPY may extend the decline ahead of Thursday’s BoJ. If the Japanese central bank refrains from indicating the need of further monetary easing, JPY, which also has a support from safe-haven demand, is likely to regain its strength.
Even if some FOMC members, as reflected via last week’s FOMC meeting minutes, cautioned that raising rates too early could cripple the momentum of the U.S. economy and triggered USD correction, the greenback managed to print positive weekly closing as improvement in Inflation mark, coupled better manufacturing numbers and three week low Jobless, helped favoring expectations that the Fed would lift the interest rate during December meeting. Further, the ECB President, during his testimony, provided strong support to the central bank’s readiness to adopt further monetary easing and also mentioned that the bank may extend QE or further cut the interest rate, if needed, giving additional harm to the regional currency and the strength to the USD. The GBP weakened against majority of its counterparts on negative CPI and higher than expected drop in Retail Sales while the AUD strengthened considerably as RBA, in its minutes, revealed that it doesn’t see any need to cut the interest rates in near-future and a rise in New-Zealand PPI and Retail Sales helped the NZD gain. Moreover, the JPY remained sideways as the BoJ refrained for favoring further monetary easing even if the country’s GDP number signaled recession and helped the JPY.
In addition to hawkish comments by some of the FOMC members during weekend, the market sentiment is now favoring the USD up-move, backed by expectations of December rate hike; however, current week has few economic releases scheduled due to holidays in US and Japan and may favor less Forex volatility.
On Monday, Flash Manufacturing and Services PMIs from France, Europe and Germany are likely to gain much attention while US Existing Home Sales and a surprise Fed announcement may become market mover during the later part of the day. Should the US central banker keep favoring the December rate hike, chances of the near-term USD up-move becomes brighter.
Even if the second estimate of US Q3 2015 GDP marked an uptick of 2.1% compared to previous forecast of 1.5%, the US Dollar couldn’t enjoy the benefits and ended up in a negative territory as the CB Consumer Confidence printed the lowest number since September 2014. The rise in German Ifo Business Climate Index to the highest levels in more than a year also helped the EUR to recover against its US counterparts while a rise in Crude prices, mainly due to geo-political tensions between the Turkey & Russia, helped commodity currencies like AUD, NZD and CAD, extend their gains. The JPY, backed by safe haven demand, also registered noticeable strength on Tuesday.
On Wednesday, minutes of recent BoJ meeting revealed that some of the BoJ’s policy board members said the bank’s decision to delay the timing of meeting its inflation target partly reflects slow improvement in the output gap, pulling back the JPY. Market players are now awaiting for monthly releases of US Durable Goods Orders and New Home Sales in order to determine near-term USD moves.
Other than the nearby releases, the crucial ones that could shake the markets are next week’s US Fed Chair’s speech and ECB meeting. Moreover, the final reading of US job details, ahead of December FOMC, would also have higher important than ever and may fuel the market volatility.
US Dollar Index rallied to eight months high as three month high Core Durable Goods Orders and a four month highs of Durable Goods Orders provided more support for the Federal Reserve to raise interest rates next month. The Jobless Claims plunged to the lowest in four weeks while the lagged behind consensus, though, remained ahead of the previous release by printing 495K mark. Further, the ECB, in its twice-yearly Financial Stability Review published Wednesday, said that the Asia risks rises, favoring speculations that the central bank may go for announcing further monetary easing on its next week’s crucial monetary policy meeting. Moreover, with no releases from UK and Japan, the GBP and JPY also weakened against majority of its counterparts while AUD stopped its north-move as business investment fell by the most on record during last quarter.
With the US markets enjoying Thanksgiving holiday, rest of the globe is more likely to witness thin liquidity; however, recent strength of the December rate hike speculations, backed by improvement in US economics, could continue favoring the greenback up-move. Though, it should be noted that the rest of the week isn’t having any major releases to publish, except tomorrow’s UK second estimations of Q3 2015 GDP, and market players may now eye for the crucial next week which encompasses ECB, US NFP, EU CPI, UK headline PMIs, RBA and BoC. Hence, it would be obvious that wild moves can take place during the weekend trading sessions and traders are advised to not participate in these moves with an intention of getting positional trades. Unless the next week passes, nothing is concern except the USD rise ahead of the releases and hence short-term profit booking positions favoring greenback should be considered to trade.
Higher than expected GDP print, upbeat Durable Goods Orders and overall optimism about the December rate hike, all contributed towards resulting another positive weekly closing by the US Dollar Index (I.USDX). The Euro couldn’t enjoy the benefits of positive PMIs as market players remained worried about this week’s crucial ECB meeting that would determine whether the European Central Bank will cut its interest rate or extend/expand the QE or both. Moreover, the GBP remained quite negative even if the GDP number matched consensus as Consumer Confidence plunged to the lowest since January while the JPY gained against some of its counterparts due to rising safe haven demand. The Commodity currencies were in the red due to Chinese equities’ plunge during weekend while Crude and Gold prices extended their declines due to supply glut and rising dollar curbing their demands.
During early Monday, the Japanese industrial output rose for a second straight month in October and retail sales grew much faster than expected, helping the JPY while rise in New-Zealand ANZ Business Confidence helped NZD recover some of its early losses. Moreover, contraction in German Retail Sales provided another reason to the EUR bears.
For the rest of the day, Chicago PMI and New home Sales from USA could gain majority of the market reaction while Thursday’s ECB and Friday’s US NFP would determine near-term moves of the global financial markets.
Even if it is nearly certain that the Fed would hike its benchmark interest rate and the ECB would join the other way round, if not in December than in early 2016, hawkish words of ECB President, coupled with pessimistic US NFP may help the EURUSD recover some of its recent losses while actual actions meeting market forecasts would make the pair vulnerable enough to test parity level soon. Hence, all eyes should be centered around the weekend events.
Even with a below 50 print of US Chicago PMI and lower than expected hike in Pending Home Sales, the US Dollar managed to mark a positive closing on Monday while the Euro remained sluggish ahead of the crucial ECB meeting and downbeat German Retail Sales provided additional damages to the regional currency. The GBP was a bit on the upside while the commodity currencies, like AUD, NZD and CAD, kept maintaining their downtrend even as the news from IMF that their largest consumer, China, is successfully able to include its currency, Yuan, into SDR basket. The JPY held its gains with strong safe haven demand while the crude prices stretched their downside.
During early Tuesday, the Chinese official Manufacturing PMI plunged to the lowest level since August 2012 with 49.6 print while Non-Manufacturing PMI, also known as Services PMI, rose to 53.6 from 53.1 a month earlier. Also, Caixin Manufacturing PMI edged up to 48.6 in November against the forecast of 48.3. The news provided another setback to the dragon nation that still couldn’t come out of pessimism even after six interest rate cuts. Moving on, the RBA held its monetary policy intact for the seven consecutive meeting and said improvement in consumer confidence and employment details still paints a rosy picture of the economy while inflation may get affected due to Chinese negativity. The JPY was on the upside during early Tuesday as capital spending by Japanese companies surged the most in eight years, favoring GDP upgrade in next week’s reading while news from the WSJ that the GPIF started to hedge some of its investments against fluctuations in the euro provided additional strength to the JPY. Moreover, the US Dollar Index completed its best month since July and witnessed a profit booking session during the start of Tuesday.
With market players started behaving like the Fed rate hike during December 16-17 meeting has already priced-in, the USD is more likely to witness a downside if the Friday’s NFP prints downbeat number while the ECB can provide more liquidity into the market as hesitance in signaling monetary policy easing can fuel the EUR short-covering rally. Hence, it would be in the best interest of the market players to wait for the headline details scheduled during the week and only take intraday positions while avoiding the longer-term investment decisions until the crucial month ends.
Even if the US Construction Spending rose in October to the highest level since December 2007, plunge in the ISM Manufacturing Index to its weakest level since June 2009, coupled with dovish tone of the FOMC members, Charles Evans, during his public appearance, favored profit bookers on Tuesday, making the greenback register daily negative closing. The Euro remained on the sluggish side ahead of the CPI and crucial ECB meeting while the AUD and NZD kept marking their highs against majority of its counterparts due to improvement in Chinese Services PMI and RBA decision of not cutting down the interest rate. The GBP remained weaker as Manufacturing PMI marked lesser than expected number and the BoE Governor, in a public appearance, said indirectly that the central bank’s next move would be an interest rate hike than a cut but it won’t be nearby. Moreover, the JPY and the Crude witnessed negative sessions as lesser than expected Japanese fundamentals, coupled with upcoming OPEC meeting which is less likely to alter group’s output, hurt them respectively.
On early Wednesday, Australian GDP rallied at a quicker to 0.9% pace than economists forecast 0.7% in the third quarter, driven by the fastest gain in exports since 2000, and supporting the central bank’s decision Tuesday to keep interest rates steady. However, the AUD failed to keep up the rise as market players again turned towards the USD after Tuesday’s pullback ahead of crucial releases like, EU Flash CPI and US ADP number, coupled with the US Fed Chair’s public speech wherein she is expected to favor December rate hike for which there are 70% chances of success, as indicated by the Bloomberg. Other than the EU CPI and US details, UK Construction PMI and BoC monetary policy meeting, are some other important events that could continue fueling Forex moves today.
As the recent market plays again favored the greenback ahead of important releases, chances of USD bull-run continuation can’t be denied. However, a higher than expected rise in EU CPI might for the ECB towards avoiding the monetary easing and triggering sharp short covering in EURUSD; Moreover, weaker than expected ADP number can also favor further downside of the US Dollar. Hence, it would be in the best interest of the market players to stay on the sidelines unless the actual outcomes of the important releases comes and meanwhile keep supporting the USD on an intraday basis.
With the ECB disappointing markets with too lesser than expected monetary easing measures, with cutting down the deposit rate by 0.1% to -0.3% and extending the QE for six more months than the initial date of September 2016, the EUR rallied considerably and alternatively harmed the USD. Moreover, comments by the Fed Chair, during her testimony just after the ECB meeting, revealed that the current labor market details, published on Friday, is less likely to bear the utmost importance and nullified the impact of higher than expected NFP mark. The JPY witnessed downside as some of the BoJ policy makers doubted the ability of central bank’s monetary easing measures to reach the inflation target and suggested to remove the date limit for the same target while the GBP also witnessed downside with weaker Manufacturing and Construction PMI. Moving on, the commodity currencies were kept trailing in red due to global commodity pessimism, mainly triggered by China, while the crude prices plunged as OPEC refrained from production cuts in its meeting, favoring additional supply glut.
However, the market again started favoring the greenback and punishing the EUR after the ECB President said the central bank may consider for additional stimulus, if needed, during its upcoming meeting, and the speculations concerning December Fed rate hike bolstered. The JPY kept witnessing downside, as one more BoJ policy maker uttered negative remarks for the central bank’s current monetary policy. The AUD and NZD kept running down as AU ANZ Job Advertisements marked 1.3% against 0.3% prior downward revision and the RBNZ is more likely to cut its interest rate to the lowest since 2009 during this week’s monetary policy meeting.
Having witnessed ECB’s disappointment and NFP’s non-impactful reading, this week has fewer important economic events, except Japanese GDP, Chinese Trade Balance, RBNZ and BoE, that would provide Forex liquidity. However, major flows are likely to continue favoring USD on the back December rate hike speculations. Hence, it would be in the best interest of the market players to buy USD in the small lots and on the intraday basis to take advantage of current moves.
Dearth of major economic releases, coupled with on-going rout of EUR short-covering rally, kept hurting the US Dollar on Tuesday as well as on early Wednesday while higher than initially forecasted Japanese GDP helped JPY extend its running gains. The GBP, on the other hand maintained its downturn as three months’ low Manufacturing Production supported the UK currency bears ahead of Thursday’s BoE meeting. Moreover, plunge in the Crude prices and some of the major commodities couldn’t let the AUD, CAD and NZD, commodity currencies, enjoy the benefits of recent USD downturn.
On Wednesday, markets seems stretching its previous inclination of selling USD; however, the commodity currencies gained a bit during early trading hours as Chinese CPI marked higher than expected number; though, the actual figure is lesser than government’s 3.0% target and a continuous plunge in PPI kept making downside pressure. Moreover, the Bank of Canada Governor, Stephen Poloz, said on Tuesday, that the nation’s economy is accelerating the recovery mode and it becomes less required to use unconventional policies such as quantitative easing to spur growth but the CAD couldn’t enjoy the said comments benefit due to plunging oil prices, its main export.
Also, the NZD isn’t showing more signs of improvement ahead of RBNZ meeting, Thursday, when the central bank is likely to cut its benchmark interest rate while Japanese Machine orders’ print showed its continuous contraction; though, with smaller losses.
As the current market actions are well against USD and there aren’t any big US releases except Friday, when Retail Sales, PPI and Consumer Sentiment Index will be released, it would be better to transfer some of the intraday funds against the greenback while the EUR is a good call to buy.