Weaker economic numbers from US coupled with the optimism for Greece, provided negative closing to the US Dollar on Tuesday. The indices concerning Empire State Manufacturing and the NAHB Housing Market lagged behind the previous reading as well as consensus. Moreover, the talks between the European finance ministers and the Greece continue taking turns and at the end of Tuesday there are hopes that the Greece will agree for the six month extension to its existing bailout package. The Bank of Japan, in its monetary policy meeting on early Wednesday, said that they will continue with the existing monetary measures in orders to avoid cooling down inflation while the SNB Chief, signaled that they can go for an interest rate cut to ward off the negative effects of considerable CHF strength.
Wednesday is an important day of the week for the forex market as it offers many important details in addition to having the solution to the Greek bailout program. The economic readings include UK Labor market details and BoE meeting minutes, FOMC Meeting minutes, US Building Permits and Housing Starts, Canadian Wholesale sales and New Zealand PPI numbers.
Should the minutes of BoE and FOMC contain hawkish tones, the currencies of UK & USA can rally considerably while the UK labor market details provide additional information to judge the strength of GBP. Moreover, the agreement between the Greeks and the European leaders can provide considerable strength to the Euro as against the heavy decline should they again fail to agree.
Much awaited FOMC meeting minutes, published late Wednesday, revealed quite a surprise for the market players as policy makers signaled that the rising USD can dent the exports and said increasing interest rate soon can become worrisome for the US economy’s recent strength. Moreover, some of the policy makers said to keep the Fed Funds Rate at its lower levels for a longer period of time before hiking it. The news provided additional fuel to the ongoing weakness of the USD. Moreover, the GBP gained considerable after optimistic labor market details and the JPY strengthened on the back of improved export numbers and hawkish tone of BoJ policy makers. The Euro region currency remained sidelined as the Greece again failed to submit their proposal for extending the current bailout package on Wednesday. The government is expected to submit the same during Today. ECB policy makers on Wednesday set Emergency Liquidity Assistance for Greek banks at 68.3 billion euros ($77.9 billion), up from 65 billion Euros.
Having witnessed the important readings of the week, today being is more of the silent day on economic front with US Jobless Claims & Philly Fed Manufacturing Index are likely creating the headlines. However, political turmoil at Greece can continue fueling uncertainty into the global financial market. Hence, it would be better to support the safe haven assets (JPY, Gold and the USD to some extent) while taking trade positions.
With the US Jobless Claims falling behind the consensus and previous readings, US Dollar re-gained its support from market players that had confidence loss in the greenback after dovish FOMC meeting minutes. The Euro remained subdued even as the Greece submitted draft proposal for the bailout extension due to German comment that the proposal is “not a substantial solution.” European finance ministers are scheduled to meet in Brussels today to solve the issue concerning Greece. Should there be continued lack of agreement between both these parties, namely Greece & the European leaders, chances of Grexit can be heightened and that can trigger considerable EUR decline. Elsewhere, the Japanese Yen also traded volatile with the Flash Manufacturing PMI testing the lowest level since July 2014 while commodity currencies, namely AUD, NZD & CAD, registering declines against it US counterparts.
As the Chinese markets are closed, and the Japanese details have already being published, European Flash PMIs, relating to Manufacturing and Services, Retail Sales from UK & Canada, and the Eurogroup meeting is likely to gain attention of the market. Should the UK Retail Sales plunge negative, as expected, the GBP can liquidate some of its recent gains; however, a considerable improvement into the number can become strong positive for the UK currency. Moreover, Flash Manufacturing PMI, another manufacturing relating numbers from US, is also likely to reveal weakness in manufacturing activity and is likely reversing the yesterday’s USD gains.
Even with the dovish FOMC meeting minutes and weaker economic numbers, US Dollar Index (I.USDX) registered its first weekly gain in previous four as market players keep supporting the bets for near-term interest rate hike ahead of the Testimony by the Fed Chai, Janet Yellen, during the current week. Uncertainty over the Greece exit eased a bit after the European leaders agreed to extend the current bailout package of the troubled nation for four month, lagging behind the demand of six month. However, the Greece needs to file list of reform measures to euro zone by Monday to secure financing, and a lesser than forecast fund availability continue hurting the regional currency, Euro. The GBP declined during last week with weaker Retails Sales leading the pessimistic economic numbers. The Yen also joined the weaker path even after the BoJ remained intact in their policy measures and the hawkish comments by the adviser to Prime Minister Shinzo Abe. The Dollars of Canada and New Zealand plunged with the weaker economic details signaling weaker stance while the Australian Dollar gained supported with the pullback by traders at lower levels.
As the China is on Lunar new year holiday, market players are likely to concentrate on German Ifo Business Climate and US Existing Home Sales to determine near-term market movement. This week, testimonies by the heads of Federal Reserve and the ECB and the Prelim GDP from US are likely to gain attention of market players. Should the Fed Chair supports her view of near-term interest rate hike by stating improvement in economic details, which has weakened off-late, the USD is likely to witness a strong pullback while the otherwise case can become detrimental for the greenback. Moreover, Chinese Flash reading of HSBC Manufacturing PMI can become important for the Commodity currencies and the Industrial world. Should the actual reading continue trailing 50 reading, the AUD, NZD & the CAD are likely to witness considerable declines.
Nine month low Existing Home Sales couldn’t hurt the US Dollar as decline in commodity prices, coupled with the uncertainty over Greece, even after four month extension of loan package, supported the Greenback on the first day of the week. Greek leaders have filed the draft paper of the schedules needed to acquire recently approved four month extension into their loan package; however, uncertainty over the final version and the situation after four months are continue supporting the chances of Greece leaving the Euro zone. Moreover, UK CBI Realized Sales tested the lowest level since November 2013, hurting the GBP, while the commodity currencies, AUD, NZD & CAD, extended their decline as another plunge in commodity prices, mainly driven by the Crude and Gold, hurt their economic outlook. Japanese Yen strengthened on Monday after the speculation of a halt to expansionary policy near the year-end.
In addition to the testimony by the Fed Chair, Janet Yellen, in-front of congress, there are many other crucial releases scheduled for the day, like UK Inflation report hearings, Speech central bank heads of ECB, BoC and RBNZ, US CB Consumer Confidence and Eurogroup meeting. However, speeches by the ECB head & Fed Chair, as a part of the testimony, are likely to gain major attention of the market players. Should there be a hint of near-term interest rate hike by Janet Yellen, or the drop of the word “Patience” could provide considerable strength to the USD. However, a neutral tone can become detrimental for the USD strength. On the other hand, bold statement by the ECB President, Mario Draghi, is less likely to turn broadly weaker Euro into the strong currency. Also, considering the weakness in commodity basket, hint for the near-term interest rate cut by the RBNZ and BoC Heads can provide additional weakness to the NZD & CAD respectively.
With the first day of testimonies by the heads of ECB & Federal Reserve, coupled with the BoE Inflation Report Hearings and the US CB Consumer Confidence, markets remained volatile during Tuesday. However, Fed Chair’s comments sound more of the neutral, as expected, and the CB Consumer Confidence Index falling behind previous readings and expectations, US Dollar Index registered a negative closing on a daily basis. The Fed Chair, in her testimony to Congress, said that the interest rate hike isn’t imminent; however, this isn’t indicate lower interest rate for a prolonged time as she planned to hike the interest rate during later part of the current year supported by the improvements in US growth numbers. The ECB President continue signaling a no change expectations and supported a wait and watch approach while the BoE’s inflation report hearing signaled that the UK Inflation will soon test its 2.0% target rate and that can support the central bank in fueling the interest rate. Moreover, the Greece finally got its approval for package of new economic measures and gained support for an extension to the country’s bailout agreement by four more months; however, the German law makers will vote on the matter on Feb. 27 that will finally extend the country’s current loan program that is going to expire on the month-end.
During the early part of the day, China released its Flash reading of HSBC Manufacturing PMI after the New Year Holiday closed on Wednesday. The reading tested four month high , mainly backed by recent monetary measures, to surpassing the 50 mark by printing 50.1 number. The release provided strong support to the commodity currencies.
For the rest of the day, second round of testimonies by the heads of ECB & Federal Reserve, coupled with the speech by BoE Governor, and the US New Home Sales with New Zealand Trade Balance, are likely to fuel volatility into the forex market. Should the Fed chair signals any time-limit for the interest rate hike, and sound hawkish, the USD can regain its strength. Moreover, a dovish tone by the ECB President could provide additional damages to already weaker Euro.
Even after better than forecast New Home Sales, the US Dollar Index registered its second consecutive daily decline as the Fed Chair, in her testimony to Senate Banking Committee, said that the Federal Reserve is in no hurry to raise their benchmark interest rates. They would first remove the word “Patience” from the FOMC statement and can hike the rates in any of the following meetings, effectively during the second half of the year. The statement prompted market players to push back the expectations concerning near-term interest rate hike and hurt the greenback. The Euro remained sidelined with Draghi continued maintaining its status-quo for the current monetary policy while the GBP rallied heavily after the BoE Governor, in Inflation Report hearings, said that the central bank wil achieve its target 2.0% inflation soon; moreover, BoE’s policy member, Forbes, said that the rate hike in the “nearer future may be needed to ensure financial stability." The Australian Dollar maintained its up-move post better economic numbers from china and of their own while the JPY rose with the increment in safe haven demand support. Also, the news that Federation of National Public Service Personnel Mutual Aid Associations, the body managing Japan’s national civil service pensions, will raise its target allocation for domestic stocks to 25% from 8% provided additional strength to the Japanese currency.
Having heard from leaders of major central banks, economic numbers are set to fuel volatility into the forex market during the rest of the week. For Thursday, GfK German Consumer Climate & German Unemployment Change, UK Second estimation of Q/Q GDP, CPI numbers from US & Canada, US Durable Goods Orders and important Japanese readings are likely to become important for the forex market.
Should the US numbers continue falling behind market expectations, the USD is likely to extend its decline while the improvement in UK numbers will become added benefit for the GBP, which is more likely. AUD is likely to reverse its gains on the back of long liquidation while the NZD gains, that were mainly because of the surprise hike in Trade Surplus, is also likely to liquidate.
Yesterday, Dollar Bulls, disappointed by the earlier week releases and Fed Chair’s Testimony, regained their strength as the Core CPI number that tested three month’s high rejuvenated confidence in market players about near-term interest rate hike by the Federal Reserve. The Dollar tested one month high after the release and is taking a breath during the start of Friday. The Japanese Industrial output, released earlier, showed the industrial output increased the most in more than three years while retail sales slid and inflation slowed. The news strengthened JPY that has lost some ground yesterday. The Euro remained weaker even as the German numbers signaled positives while the GBP remained mixed as the UK second estimation of Q4 2014 GDP number matched expectations while the Prelim reading of Business Investment matched the downwardly revised prior figure and lagged behind the expectations. Commodity currencies also weakened with the weakness in commodity prices and stronger Dollar while the regained some strength due to ANZ Business Confidence that rose to six month high.
Even after that raft of economic details, already published during the week, today US market readings, like Prelim GDP, Pending Home Sales and Chicago PMI, are likely to fuel volatility into the Forex market. Moreover, first readings of CPI for Germany, Italy and Spain can provide additional strength to the Forex market volatility.
As the US GDP numbers is likely to witness downward revision, the actual reading when meeting with expectations, can liquidate yesterday’s gains; however, an upward revision could provide considerable strength to the greenback.
With better than forecast Q4 2014 GDP number, coupled with not so dovish comments from Fed Chair, in her testimony, strengthened the US Dollar Index during last week. Moreover, the second in three months surprise rate cut by the central bank of China provided additional strength to the US Dollar during the start of current week. The Euro region currency remained in trouble even after the Greece got its four month extension to current bailout program that has expired on the end of February. The GBP gained heavily after the BoE policy makers signaled earlier than expected rate hike and a return to target inflation rate soon. The Australian Dollar also gained as the Chinese Manufacturing numbers fared better than consensus; however, the official reading of Manufacturing PMI couldn’t surpass the 50 mark.
Even after raft of important economic details, published last week, the current week, which started with improved Chinese PMI numbers, also becomes important as it contains the monetary policy meetings of ECB, BoE, RBA and BoC. Moreover, the US NFP is also likely to become target headlines during the later part of the week.
As the recent improvement in US Dollar is well supported by the rise in safe haven demand, continuous flow of better economic numbers, mainly the labor market details, could support the US Dollar Index that re-tested the 11 year high during early Monday. Moreover, market attention would also be higher on the details of 1 trillion euro ($1.1 trillion) government bond-buying program, which begins this month. Should there be a continuous flow of weaker economics from Euro, the regional currency could plunge below its parity level against its US counterpart.
Yesterday, US Dollar gains were capsized near the 11-year highs as consumer spending fell for a second straight month in January while ISM Manufacturing PMI tested the lowest level since February 2014. Moreover, comments by the economic adviser to Japanese Prime Minister tha the dollar/yen may be at the “upper limit of comfort zone.” Provided another restriction on the USD up-move. The Australian Dollar was the show-stealer as it rose in the early hours of the day on the back of Chinese details and rallied on Tuesday after the Reserve bank of Australia (RBA) stepped back from cutting interest rates and the Building Approvals rose to 3 month high beating the pessimistic forecast. However, the RBA left the door open for the near-term interest rate in order to settle the inflation and growth prospects. The UK Manufacturing PMI climbed to the seven month high and is likely providing support to the GBP.
Having witnessed the RBA moves and the Australian Building Approvals, that supported the AUD, coupled with the rise in Crude prices, that helped the commodity currencies, German Retail Sales, UK Construction PMI and Canadian GDP numbers are likely to occupy the headlines for the day. Moreover, the speech by the BoE Governor, Mark Carney, could also provide considerable GBP moves.
As the US Dollar Index (I.USDX) again failed to break its 11-year highs, chances are higher that the pullback gets extended and can provide bite of negative closing to the US Dollar against majority of its counterparts.
I support your point of analysis that the broadly weaker Euro, mainly driven by pessimistic economic details, could continue drifting the EURUSD downside; however, the decline seems capped at the moment with neutral tones of FOMC members, in terms of interest rate hike, coupled with not so positive economic readings.
With no releases to track from US, market players trimmed some of the USD longs on Tuesday ahead of the ADP Non-farm Employment Change, an earlier signal for Friday’s NFP. The Euro region currency also traded in cold water even after improved German Retail Sales number while the Canadian Dollar rallied with the monthly GDP reading beating the forecast. Moreover, the UK Construction PMI rose to the four month high while the New Zealand GDT Price Index lagged behind prior releases.
During the early hours of the day, the Australian Bureau of Statistics released Q4 2014 GDP number that lagged behind the forecast of 0.7% by printing 0.5% mark. The numbers fuelled speculations that the RBA won’t avoid another interest rate cut in its May meeting. For the rest of the day, there are many important readings that could fuel the market volatility. Amongst them, the UK Services PMI, BoC monetary policy meeting and the US ADP are likely to grab the headlines of the day. Moreover, ISM Manufacturing PMI and Euro-zone Retail Sales are some other readings that could continue making traders busy.
Against all odds the US Dollar surpassed its 11 years highs and rallied considerably on Wednesday ignoring weaker ADP number as market players remained optimistic about the Friday’s NFP details. Moreover, the Euro also plunged to the 11-year lows against the USD ahead of the ECB meeting, scheduled for the later Thursday wherein the ECB President will unveil the plans for the recently announced QE. Lower than forecast UK Services PMI negatively affected the GBP while the commodity currencies remained slightly uplifted wherein the CAD strengthened heavily as the BoC refrained from interest rate hike.
During the early part of the day, the NZD liquidated heavy gains as signs of a probable interest rate cut emerged from the Kiwi nation as the RBNZ seeks feedback on a new mortgage regime for residential property investors. Moreover, the Australian Trade Balance and the Retail Sales printed better numbers and supported the Aussie. For the rest of the day, monetary policy meetings by the ECB and the BoE are likely to enjoy the limelight. Even if both these banks aren’t likely to act upon any measures, dovish tone by the ECB President could provide considerable damages to the Euro. Moreover, the US Jobless Claims and the Canadian Ivey PMI can provide additional details to fuel volatility into the forex market.
Other than the economic details, Geo-political tensions in Ukraine and the recent speech of Israel PM, could continue supporting the safe-haven demands of the JPY, USD and Gold.
With the seven year low Unemployment Rate, US Dollar Index (I.USDX) rallied to the 11 year high during last weekend as improvement labor market details fueled speculations that the Federal Reserve might raise interest rates sooner rather than later. The Euro region currency decline heavily as ECB President, in his speech on Thursday, unveiled plan of buying 60 billion Euros a month of euro-area public and private debt through September 2016. Moreover, the Greece is running out of its capacity to pay even after the approval of debt package extension. The news spurred speculations that the new government may go for another round of election if the newly formed government fails. Commodities extended declines as strong USD hurt their demand.
During the early week releases, the Japanese revised GDP number fell behind preliminary expectation to 0.4% from 0.6% suggesting the need of additional monetary measures during the rest of the year by the BoJ. Also, the ANZ Job Advertisements fell to the lowest level in three months, providing additional support to the need for RBNZ to cut their benchmark interest rate.
For the rest of the day, there isn’t anything important from the economic calendar to track; however, Eurogroup meeting can provide liquidity to the Euro pairs. This week’s concentration is likely to be more on the ex-US releases as other than the US Retail Sales there isn’t anything big to track the USD moves.
Having witnessed a mild pullback on Monday, after the considerable rally on the back of weekend’s job numbers, the US Dollar extended its up-move on early Tuesday against majority of its counterparts. The greenback tested eight year high against JPY and remained near 12 year high against Euro. Euro region has one more reason, other than the weaker economics, to decline, that is Greek inability to pay looming debt service commitments; however, EU members are scheduled to talk the matter on Wednesday and could inject funds to help the troubled nation. Also, weaker Chinese and Australian numbers put Australian dollar to a five-week low against its US counterparts.
During the early day releases, Australian NAB Business Confidence plunged to the lowest level since August 2013 testing the number 0 while the Chinese CPI surpassed forecast and printed 1.4% beating 1.0% consensus & 0.8% prior; however, the PPI measure from China declined to the lowest since November 2009 to -4.8%.
For the rest of the day, testimony by the BoE Governor and the Australian Westpac Consumer Sentiment Index, coupled with the US Wholesale Inventories m/m, are likely to gain market attention. As the BoE Governor is more likely to remain hawk in his speech, chances support GBP strength than the otherwise. Moreover, the USD is more likely to continue its up-move against majority of its counterpart but a pullback can’t be denied during the later part of the day.
It seems that the US Dollar couldn’t limit itself from enjoying post-NFP details as it continued rallying to the 12 years high across the board and tested 8 year high against its Japanese counterparts. Market players adhered to risk averse trades and supported USD buying while the equities witnessed little help and the commodities declined. The same more caused considerable declines into the commodity currencies, namely AUD, CAD and NZD.
During the early part of the day, Chinese Industrial Production plunged to the lowest since March 2009 while the Retail Sales declined towards the record low, providing another round of weakness to the commodity currencies and the industrial world.
There are many important readings scheduled for the rest of the day that could fuel considerable volatility into the forex market. RBNZ, UK Manufacturing Production and the meeting between experts from Athens and its international creditors with the aim of unlocking further funding are likely to become headlines of the day.
As the greenback has rallied considerable, chances are higher that a slightly weaker data point, Retail Sales and Jobless Claims, scheduled for tomorrow, could provide chances for considerable pullback. Alternatively, should these numbers meet their optimistic forecasts, for which chances are higher, the USD might continue its upwards trajectory.
And the ECB Head, even after spelling some BOLD words, push the EURUSD below 1.0550 mark! Yesterday, in his speech, the ECB President, Mario Draghi, said “We can deploy and we will deploy monetary policy in a way that can and will stabilize inflation in line with our objective.” However, the euro-zone bonds declined heavily after the comments and went deeper into negative territory and others to all-time lows. Moreover, Greek inability to bend to the Euro-zone leaders to supports the bailout package and vail loan funds immediately also weakened the Euro. Hence, even with the absence of any positives from US Dollar Index (I.USDX), other than the on-going raft of speculations of sooner interest rate hike, the US Dollar completed its second day of heavy gains.
At the rest of the world, the monetary policy meeting of Reserve Bank of New Zealand (RBNZ) avoided joining rest of the major central bankers by stating that they will keep interest rates on hold even as inflation slows to zero. The bank’s Governor said New Zealand’s economic growth is accelerating and there are signs of a house-price bubble developing in Auckland that is restricting the RBNZ from cutting down their benchmark interest rate. The NZD rallied heavily after the release. The Australian Dollar (AUD) also got some positives during the start of the day as the Unemployment rate eased to 6.3% from 6.4%while the number of people employed advanced by 15,600, erasing a revised drop of 14,600 in January. However, the unemployment rate remained above 6% for the consecutive nine month and could drag down the AUD. The Crude Oil prices rallied as the Geo-political tensions in Libya and North Africa coupled with the contract changes spurred demand of Black Gold.
Even after important releases strengthened NZD & AUD during the early hours of the day, market players are likely waiting for the US Retail Sales and the Unemployment Claims, scheduled for release during the later part of the day, in addition to UK Trade Balance details to determine immediate market moves. Should the Retail Sales meet expectations, chances are higher that the USD could extend it rally on the back of speculations that the Fed will provide signals for interest rate hike during next week’s meet. However, a weaker reading could restrict the on-going up-move of greenback.
Yesterday, with an unexpected decline in Retail Sales, registering third straight plunge with -.6% figure, the US Dollar Index trimmed some of its gains earned during early week days. The decline in greenback, holding back the fourth consecutive weekly advance, also spurred the equity markets that have been facing liquidation due to surmountable USD strength. Other than the Retail Sales, US Budgetary Deficit also widened to the highest level since March 2014. The European Currency, Euro, witnessed a bit of pullback as bond yields for the troubled region improved after witnessing heavy decline; however, uncertainty over the Greece getting loan funds continue providing pressure to the regional currency. GBP remained more or less silent against USD as Bank of England Governor Mark Carney, in his speech yesterday, signaled the was in no rush to raise interest rates, taming expectations of a hike in early 2016. Moreover, the JPY and the commodity currencies also rallied with a rise in commodity prices and the decline in greenback.
With no major economic data due on Friday, market players are likely concentrating on Canadian labor market details and US PPI & UoM Michigan Confidence Index. Should the US details remained weaker the USD could extend its yesterday’s losses; however, an improvement in reading could again fuel the USD rally.