Flurry of public appearances by influential FOMC members, coupled with the plunge in profits of Chinese industrial companies, to the lowest levels since 2011, shook the global financial markets on Monday, pulling down the Gold, USD and majority of commodity basket. Moreover, the equities also witnessed sharp selling as worries from China speeded pessimism for some of the commodity related firms and forced market players to cash out of the markets and sit on cash. Even if majority of the FOMC members do favor an interest rate hike during the current year, market seems convinced that global economic slowdown may not allow the Federal Reserve to lift its interest rate for the first time since 2006. Yesterday was the day of mixed comments from the Fed policy makers wherein New York Fed President William Dudley and John Williams, head of the San Francisco Fed were in favor of sooner interest rate hike while Chicago Fed chief Charles Evans talked in a far more dovish tone to wait till the global economy improves a bit. The EUR gained a bit with no economic release/announcements as a plunge in USD helped the regional currency while the JPY gained against majority of its counterparts due to rising safe haven demand.
Having witnessed mixed messages from FOMC members yesterday, today’s German CPI, US CB Consumer Confidence and a speech by the BoE Governor will take command of the market. Should the US Consumer Confidence extend its rally, though less expected, the greenback may witness another push towards up-move while the weaker CPI from Germany, largest European economy, may pullback the EURO. Moreover, comments from the BoE Governor, Mark Carney, will be important to determine near-term GBP moves. Should the central banker follow recent comments from BoE policy makers that the economy still needs sometime to lift its interest rate, the GBP can plunge heavily. However, hawkish tone of the governor can reimburse the recent losses by the UK currency.
Hence, it would be in the best interest of the market players to wait for the actual announcements and read the message thoroughly prior to taking any trades ahead of Friday’s US NFP and Thursday’s EU Flash CPI which are crucial releases of the week that could help determine near-term market moves.
On Tuesday, the USD again closed on the negative note, even with consumer confidence rising to the highest levels since August 2007, as markets being afraid that the world’s largest economy isn’t out of the Chinese pessimism and may avoid raising rates this year. Moreover, speculations about the ECB’s QE extensions have also faded as one ECB executive member said it is too early to think of that measure to use. The HSBC, on late Monday, joined Morgan Stanley, Bank of America Corp. and Citigroup Inc. in raising forecasts this month for the euro against the dollar. The GBP plunged without much of the concern ahead of its GDP reading today while the JPY was a clear winner with strong safe haven demand support. The equities kept marking their downside during its month-end and quarter-end flows while commodities progressed in their southward journey with Crude oil witnessing another shock as US API inventories marked higher than expected crude supply and Russia said to increase in oil production to pump the oil supply glut.
During the early part of the day, Japan’s factory output unexpectedly fell for the second straight month in August, by 0.5% contraction against 1.0% expected increase while consumer spending also remained fragile, with retail sales up just 0.8 percent in August from a year earlier, slowing markedly from 1.8 percent growth in July. The Japanese details fueled worries that the BoJ, in its meeting during next week, may favor an asset purchase boost.
Today becomes one of the important day of the week for global financial market as UK and Canadian GDP, US ADP numbers, Chicago PMI, coupled with Fed Chair Janet Yellen’s speech, and the EU Flash CPI may become a fuel for considerable market flows. Should the Fed Chair maintains her hawkish tone, chances of USD reversing its early week declines can’t be denied while a weaker reading of EU CPI and UK GDP can be detrimental for EUR and GBP respectively. Hence, it is in the best interest of the market players to keep an eye on all the events prior to taking any trades.
Even if the Chicago PMI joined the six out of seven US manufacturing indices that lag behind the forecasts, the USD registered gains on Wednesday as improvement in ADP numbers helped expected a higher NFP and an interest rate hike during 2015. Fed Chair, Janet Yellen, avoided speaking anything relating for Fed monetary policy making during her yesterday’s speech. The GBP also registered some gains as Current account deficit shrank and the GDP mark matched its initial 0.7% consensus while the Euro remained on the downside as Flash reading of its inflation gauge plunged to the lowest in six months, marking the negative 0.1% print and favoring a QE extension. Commodity currencies remained a bit high even without no improvement cues from China as profit booking moves at the month and quarter-end trading pulled them back. The Gold prices maintained its downside while Crude oil prices remained a bit gloomy with higher US stockpiles while renewed geo-political tensions between Russia and Syria were largely ignored.
During the early part of the day, Chinese Manufacturing indices flashed mixed signals; though, both of them were in the below 50 contraction region and favored additional monetary easing by the dragon nation. Moreover, it was also communicated that this time’s Flash reading of Caixin Flash Manufacturing PMI was the last and the Caixin will cease this practice henceforth; however, it will continue printing the final Manufacturing PMI alike the Official manufacturing PMI release. Further, the Japanese details were on the upside as Non Manufacturing and Final Manufacturing PMI improved but comments from the former BoJ deputy governor that the central bank is in need of pushing more stimulus can hurt the JPY. The IMF Director, Christine Lagarde, said that the global economic growth is likely to be down and the institute may probably cut down its forecast during the October 06 release.
For the rest of the day, UK Manufacturing PMI, ISM Manufacturing PMI and Swiss Retail Sales are likely to govern the market moves. Though, with recent bounce in USD, a good reading of ISM Manufacturing can signals an improvement in Q3 GDP print and can help greenback in extending gains.
With another disappointing US labor market reading on last Friday, US Fed policy makers feel they were right when held the interest rates unchanged during September meeting, giving losses to the US Dollar Index (I.USDX) for the first time in previous three weeks. The NFP marked 142K number with revised down prior reading to the lowest in four months to 136K against previously reported 173K; moreover, Average Earning remained 0.0% with the lowest number in three months and Unemployment rate was unchanged at 5.1%. The Factory orders also plunged to the lowest since February, indicating another lag of USD decline prior to interest rate hike. Moreover, negative inflation of EU and the weaker Japanese numbers favored extended loose monetary policy measures by both the BoJ and ECB; however, with the global market uncertainty favoring JPY safe haven demand and weaker Dollar supporting EUR pullbacks, both these currencies end-up gaining during last week. The GBP remained strong against majority of its counterparts with better that forecast PMIs and declining current account deficit. The Crude also gained a bit as Russia prepares to talk with OPEC and Non-OPEC members to alter the global crude supply while fifth weekly fall in the U.S. oil rig count also underpinned crude prices.
Even being the first full week of October, three days holiday in Chinese markets, coupled with already published US NFP, could continue hurting the Forex volatility during the rest of the week. However, Today’s UK Services PMI and ISM Non-Manufacturing PMI, are some of the important details to fuel the Forex trades during the rest of the day.
Given the second fall in US job details, chances of October rate hike have faded further and market players are being cautious about the December rate hike, should the H2 2015 GDP figure be lesser than 2.0%, chances of the December interest rate lift can also be downsized providing considerable USD decline. Hence, it would be in the best interest of the traders to be aware of US related issues, mainly dealing with interest rate, to determine the trading opportunity.
Even after witnessing three month low of ISM Non-Manufacturing Index and a five month’s low by the US Labor Market Conditions Index, the US Dollar registered gains during its Monday trading as improvement in commodity markets and improving investor risk appetite favored the greenback while weaker than expected final reading of Services PMIs from Europe and Germany, together with the lowest Investor Confidence gauge since January 2015, pulled back the EUR for the first day of the week. The JPY lost some of its ground due to market risk-off mode erasing its safe haven demand ahead of the tomorrow’s BoJ decision and the GBP remained weaker against majority of its counterparts after its important PMI relating to services activity plunged to the lowest since May 2013. Moreover, the commodity currencies, namely AUD, NZD and CAD witnessed good day as rising commodity prices, coupled with absence of Chinese pessimism, due to holidays, helped these antipodeans.
During early Tuesday, the AUD kept extending its rally as rising commodity prices and RBA’s decision to hold its current monetary policy unchanged with 2.0% interest rate for the consecutive fifth time ignored weaker Trade balance numbers and fueled the Aussie. Moreover, the JPY maintained its yesterday’s decline ahead of the BoJ’s tomorrow’s decision. Even if the central bank isn’t expected to alter its current monetary policy, surprises can’t be ruled out as recent economics singal economic slowdown in Japan. The central bank is also expected to cut its long-term economic and price projections during October 30 meeting.
With the recent risk-off sentiment, ahead of the BoJ meeting, driving down the JPY, chances can’t be ruled out that a passive comments from the BoJ could provide considerable decline to the Japanese currency. Moreover, the trade balance from US and Canada, coupled with German Factory Orders are likely to provide additional information to the market traders. It should be noted that the recent advance in the USD isn’t backed by any fundamental signals and can’t be depend upon. Hence, it is better to have an intraday trades favoring the greenback but a trader/investor looking for medium-longer term must wait for the Fed comments and improved economics before supporting the USD buying.
As expected, the US Dollar liquidated its Monday gains and plunged during Tuesday, stretching the same decline on Wednesday, as IMF, in its global economic forecast, signaled that the global economy will grow this year by 3.1% from a July forecast of 3.3% and next year growth could be 3.6%, less than the 3.8% projected in July, hence, favoring the safe haven demands of JPY and cutting down the greenback strength. Moreover, comments from San Francisco Fed President John Williams also indicated that the Fed should not hike the interest rates when the market isn’t expecting the one, providing further downside to the USD. However, the greenback ignored upward revision of US economic growth by the IMF to 2.6% this year, up from a forecast of 2.5% in July and 2.8% next year, down from previously projected 3%. In addition to the safe haven demand, today’s BoJ decision of not altering its current monetary policy also helped the JPY extending its yesterday’s gains. Moreover, the Canadian Dollar extended its gains as Crude prices rallied considerable while the GBP remained sluggish with the lowest reading of Halifax HPI m/m since April 2014.
With the hawkish tone of BoJ policy makers, market players are now expecting optimistic words from the BoJ Governor, during his post meeting press conference, in order to negate chances of further monetary easing by the central banker during its expected October 30 meeting. Should it matches the market consensus, the JPY can rally considerably. Moreover, today’s UK Manufacturing Production and Canadian Building Permits are the rest of the details that could continue fueling the forex moves.
With the recent decline in USD, coupled with weaker economics and renewed doves of FOMC comments, chances are higher than the greenback could stretch its downside prior to the minutes release. Moreover, dovish comments from the minutes, to be published on Thursday, can magnify the downside of US currency.
With its mortgage application activity jumped to its highest level in eight months last week, the USD witnessed a bit of pullback on Wednesday ahead of the FOMC minutes, scheduled to release during later Thursday. The EUR witnessed downside as German industrial production plunged negative while the GBP gained considerably with upbeat Manufacturing Production data. Moreover, the commodity currencies, namely, AUD, CAD and NZD kept extending their gains on Wednesday with global markets favoring the risk-off mode and absence of Chinese pessimism favored commodity markets. Moreover, no change in BoJ and RBA monetary policies, coupled with lesser than expected dovish tone from the monetary policy statement, helped fueling the JPY and AUD while Crude prices favored its up-move even after US crude inventories surpassed expectations.
During early Thursday, the return of Chinese players, after five day long holiday season, resumed the initial trend of weaker commodity currencies and an improvement in USD while downbeat machinery orders and economy watchers sentiment from Japan trimmed some of the early gains by the JPY.
Today becomes an important day for the forex market as BoE meeting and FOMC minutes are likely to be released during the day while some of the members are scheduled to provide public appearances. Even if the September meeting was considered to be a dovish one, the minutes are likely to reveal a bit more hawkish tone as some of the policy makers, in their public speeches, kept on saying that it was a “Close Call” in meeting and rate hike in 2015 is more likely. Should the meeting reveals the same words, chances are higher that the greenback could reimburse some of its recent losses; however, failure to mention the same may become a deterrent factor for the USD to continue losing its strength. Moreover, the BoE is also likely to provide a boost to the GBP if any of the additional policy makers favor change in current monetary policy.
Thursday became a threatening day for US and UK as both the developed economies, that were expected to hike their benchmark interest rates soon, witnessed dovish messages from their central bank policy makers, pulling down the USD and GBP. The BoE, even after standing pat on its current monetary policy, refrained from discussing signals for an interest rate hike citing global market turmoil, mainly fueled by China while the FOMC, through its September monetary policy meeting minutes, seems to spread a threat that the global financial market uncertainty have made them avoid September rate hike and as the situation has resolved, chances are higher that the US central bank may continue on its stance and would delay the much awaited first interest rate lift-off since 2006. Commodity currencies and the commodity markets remained positive even in the presence of China while the JPY lost some of its charm even as the central bank refrained from supporting the late-October announcement of further monetary easing.
During the last day of the week, the Australian home loans ticked up from its revised down prior, indicating no further need of cutting down the interest rate hike, fueling the AUDUSD towards breaking the important 0.7220 resistance, testing the highest level in more than a month.
For the rest of the day, UK trade balance and the Canadian labor market numbers are what the market players would be interested in looking for while public appearance by some of the FOMC members could provide decisive USD moves.
With the recent FOMC message seemed worst than its September disappointment, chances are higher that the Fed would avoid increasing the interest rate during anytime this year, providing a weakness to the greenback. Hence, it could be in the interest of market players to keep removing their USD longs unless there are firm signals for rate hike from the US Federal Reserve.
Dovish FOMC minutes and lack of clear signals from some of the FOMC members, during their public speeches and words at IMF meeting, forced the greenback index to register consecutive second weekly decline during last week, closing at the lowest levels last seen during mid-June and vanishing some of its early September gains. However, the gains in commodity markets, mainly triggered by the improvement in Gold and Crude prices, fueled the commodity currencies, namely, AUD, NZD and CAD; moreover, with the recent signals that the China will loosen some of its fiscal measures to boost the lingering economy, the Chinese equities rallied during weekend while the same strengthened the Australian Dollar as well. The EUR, even after witnessing not so good economics, gained against majority of its counterparts as the ECB head kept on repeating his words that the economy is improving and still there isn’t any clear need to stretch the QE while the GBP was a tad weaker against majority of its counterparts, except gaining against the USD, as the BoE also joined hands with Fed to refrain from signaling an interest rate hike and vanished the speculations of stronger UK currency.
With the dovish comments from IMF meeting relating to Fed rate hike, the USD is on its loosing path during early week as well while the holiday of US, Japan and Canadian markets could make the global markets witness little activity on Monday. However, some moves from the CAD, mainly due to improvement in Crude prices, couldn’t be ignored and should be capitalized.
Even with the extended weekend at US, Canada and Japan, global financial markets remained volatile during the first day of the week and triggered the pullback into what the commodity currencies and commodity prices, including Crude and Gold, gained during its last week’s rally. However, the USD couldn’t enjoy this downturn as Fed Governor Lael Brainard said that the Fed should not hike interest rate until it is sure that the global pessimism would hurt the recent US economic recovery. Moreover, the news from influential OPEC member that the organization isn’t thinking for a drawdown into its oil production provided an additional reason to the Crude traders to cash-out the long positions.
During early part of Tuesday, the Chinese trade balance provided another drawback from the dragon economy as imports slid by 17.7% versus 16.5% forecast & 14.3% prior declines, plunging for the eleventh straight month while the Exports shrank lesser than forecast. Moreover, data from Australia showed that the Business confidence rallied to the three month high while measure on employment intentions jumped to its highest since mid-2011; however, weaker Chinese trade balance pulled the Aussie back from its recent advance series. The Japanese machine orders and consumer confidence also plunged below the forecasts; though, again erupted global uncertainty helped the JPY gained against majority of its counterparts.
For the rest of the day, UK CPI and ZEW numbers from EU and Germany are likely to make Forex traders busy during the rest of the day while return of US markets after extended weekend could favor the greenback on a temporary basis ahead of Crucial CPI details, scheduled for Thursday release. Should the UK CPI plunges into negative territory, chances are higher that the GBP could witness further downside as expectations favoring a delaying hawkish BoE gets strengthened.
Tuesday became another bad day for the USD as continued pessimism over China has started curbing speculations that the Fed will lift its benchmark interest rate during 2015 while the GBP was the weakest currency yesterday after the UK inflation plunged negative, fading chances that the BoE may go for monetary policy tightening. The EUR remained mostly on the sideline even as the ZEW indices reflected weaker confidence amongst EU and German institutions. Moreover, the commodity currencies was even weaker due to Chinese details while the Gold rallied considerably with safe haven demand and Crude oil prices plunging after the US EIA report said global crude supply is likely to persist even in 2016 as the demand growth slows and oil producers keep their output at higher levels.
On Wednesday, world’s largest economy, China, released its Inflation figures and provided another shock to the commodity currencies and to the rest of the globe as the CPI market 1.6% in September versus 1.8% estimate while PPI maintained its 5.9% fall, extending its streak of negative readings to 43 months. With the recent weaker than expected releases from China, chances are higher that the dragon nation could continue raising lending even after cutting interest rates five times since November. The RBNZ Governor, during his speech on late Tuesday, said that the central bank could cut the benchmark interest rate further during its Oct. 29 meeting even if it has cut interest rates for the third time in three months on September; however, he also said that the action would be dependent on upcoming economic details. Moreover, Japanese wholesale prices fell 3.9% y-o-y in September following a 3.6% annual decrease in August providing additional weakness to the JPY which is currently declining due to expected monetary easing announcement during upcoming BoJ meeting.
As most of the details have been opposing the strength of commodity currencies and to the GBP, the EUR is gaining with no particular reason and the chances of Fed’s delayed interest rate hike keep hurting the USD. It would be better to witness some positive US news to help the greenback during today’s PPI and Retail Sales while the GBP moves are likely to extend further declines with expected disappointment from labor market numbers. Hence, it is in the best interest of the market players to keep waiting for some good news for the USD before putting any longs on the greenback while antipodeans, namely AUD, NZD and CAD could extend their downside.
With disappointing Retail Sales and a plunge in PPI, odds of the Federal Reserve raising interest rates this year to the tested lowest since March, making the US Dollar extend its declines on Wednesday. The Euro region currency remained a bit firm against majority of its counterparts even with weaker French CPI and higher than expected industrial production contraction while upbeat jobs numbers fueled the GBP. Moreover, the AUD and NZD also gained considerably against USD due to the breakout extension. The Crude prices plunged further as higher than expected inventory number by the US API, coupled with the speculations that the OPEC won’t adjust their output while the Gold prices and the JPY remained firm due to their safe haven demands.
The Australian labor market details, indicating Employment Change’s plunge to the lowest levels, to -5.1K, since February 2015 and the unemployment rate remained steady at 6.2%, pulled the AUD downside on Thursday. The JPY also witnessed a bit of decline as weaker manufacturers’ confidence and industrial production details fueled concerns that the central bank, Bank of Japan, is likely to being forced towards another large monetary stimulus during its late-October meeting.
Having witnessed disappointing AU labor market details, US CPI, Empire State Manufacturing and Philly Fed Manufacturing Index, coupled with NZD CPI, are likely to gain major attention during the rest of the day. As market consensus favors US CPI’s decline to the lowest levels last seen in February, an actual matching with the expectation would strengthen recent market concerns that the Fed wouldn’t be able to hike interest rate during 2015 and can provide largest USD downside. Hence, it would be in the best interest of the market players to keep trading the USD decline while also looking for the hints from economic calendar.
Finally, the US Dollar got some relief from its consecutive declines on Thursday when the upbeat Core CPI fueled the yearly reading to 1.9% close to the Fed’s target of 2.0% and the Jobless Claims tested the lowest levels since late-July. The Euro declines heavily against majority of its counterparts as European Central Bank policy maker, Ewald Nowotny, favored expectations concerning QE extension. Moreover, the commodity currencies witnessed profit booking after considerable rally during early week days while the Gold prices failed to break important resistance confluence due to stronger USD and the Crude witnessed a rise as US EIA released higher that forecast drop in Gasoline and Distillate inventory levels. Moreover, the JPY was also a tad weaker with speculations favoring additional stimulus during late-October BoJ meeting and the GBP lacked any big moves due to absence of important economic details.
During the early Friday, RBA, in its bi-annual Financial Stability Review, said housing market is slowing and oversupply may force the central bank toward action, pulling back the AUD further into downside region. Market players may now await speech by BoJ Governor to look for hints relating to further monetary easing while the Final reading of EU CPI and US Prelim UoM Consumer Sentiment, coupled with Canadian Manufacturing sales, are likely important details that could continue fueling the forex moves.
Should the EU CPI matches its initial -0.1% measure, the EUR can extend its recent downside while improvement in US consumer sentiment index could help the USD maintain its immediate gains. Moreover, with the better Core CPI numbers, each positive release from upcoming US economics would strengthen the chances of Fed’s 2015 interest rate hike and can fuel the greenback’s upward trajectory.
Even if better than expected Core CPI and an upbeat three month high Consumer Sentiment releases during the late week days, the US Dollar failed to register a positive weekly closing as early week looses, mainly triggered by the weaker Retail Sales, PPI and speculation concerning delayed interest rate hike, pulled the greenback down. The Euro lost a bit more of its weight near week-end as ECB policy maker favored the need of extra monetary policy easing, signaling QE extension while the GBP rallied considerably after a drop in Unemployment rate and better than expected earnings growth helped the UK currency rise. The JPY was more of volatile as at the one point the global market uncertainty helped raising its safe haven demand while on the other hand, the talks of more easing capped major gains by the Japanese currency. The Crude was also on a positive side after the US rig count fell for the seventh consecutive week and the Gold surpassed its three month high.
On Monday, important Chinese details, namely the GDP Industrial Production fueled the forex market as the GDP, even after being higher than the forecast, remained at the lowest levels since 2009 while the Industrial production missed the consensus and registered the lowest growth since April. The AUD gained a bit after the details on the expectations that its largest consumer is still in the need of further monetary easing. The JPY have started losing a bit during early day trading as one of the BoJ ex-official signaled further need of stimulus during week end.
With ECB and BoC scheduled to take place during the week, coupled with no major US details list for publish, chances are higher that the USD is likely extending its recent strength, mainly backed by improved Core CPI. However, a signal for QE extension by the ECB would be counterproductive for the greenback. Hence, it would be better to take care of all the economics prior to taking any BIG call.
As depicted yesterday, the US Dollar extended its Friday’s rally on Monday as improved CPI have provided another reason to the FOMC members to speak out loud that the interest rate hike during 2015 is very much on the table. This time it was John Williams, president of the Federal Reserve Bank of San Francisco who said this on Bloomberg Television during Monday. The Euro region currency weakened for the third consecutive day, the largest declines during the current month as market players kept believing that the ECB President, during his press conference following Thursday’s monetary policy meeting, will signal threats from global economic slowdown and a recent negative EU inflation reading, favoring the QE extension. Commodities’ front witnessed a profit booking snap on Monday as Iran got its sanctions lift and is planning to pump 500,000 barrels per day within a week, pulling down the crude while higher USD curbed gold prices. Moreover, the Canadian Dollar which was initially hit due to weaker Crude price, witnessed another shock as the Justin Trudeau’s Liberal Party won a majority government in Monday’s national election putting an end to Conservative Prime Minister Stephen Harper’s decade-long rule.
During early Tuesday, the RBA minutes provided additional strength to the AUD which was enjoying the China’s recent plan to increase spending. The minutes said that the economic growth is likely picked up in Q3 and weaker currency helped the nation manage the recent pessimism, favoring the current monetary policy and denying any further need for additional rate cut. Further, the Swiss Trade surplus surpassed the forecast and prior, helping the CHF.
For the rest of the day, speech by the BoE Governor, US Housing Market details and New-Zealand GDT Price Index, are some of the importance details/events that could help fuel the forex market volatility. However, it should be noted that the global markets have started favoring the greenback after Friday and helped the FOMC members being hawkish, hence, better housing market numbers could extend the USD’s strength while nearness to ECB and weaker Crude prices, coupled with election results, may continue dragging the down the respective moves of EUR and CAD.
Even after the upbeat US Housing Starts, which rose 6.5% in September to an annual pace of 1.21M against 1.14M expected & 1.13M prior, the USD couldn’t sustain its previous gains on Tuesday as weaker Building Permits plunged to the lowest levels since April. Moreover, the mixed words from some of the FOMC members, namely Federal Reserve Governor Jerome Powell and Federal Reserve Bank of New York President William Dudley, also provided chances to the USD traders in cashing out some of their recent gains. The Euro remained firm as data from ECB signaled improvement in loan demand and further easing in credit conditions, waning expectations that the immediate QE extension trigger is required while GBP remained more on the negative side with expected decline in Public Sector Net Borrowing. Moreover, the commodity currencies also lost some of its recent gains as higher API crude inventory, coupled with more certain needs of global central bankers to ease pulled back the safe haven demands.
Japanese trade balance, one of the key indicator to forecast next week’s BoJ move, spread disappointment amongst the global market players as the exports grew at the slowest pace in more than a year with 0.6% gain while the imports sand 11%. The GDT Price index from New-Zealand also plunged negative to the lowest level in nearly five months, providing additional weakness to NZD.
With Japanese trade balance details nearly cleared the doubts relating to Bank of Japan’s next week’s meeting, the Bank of Canada’s monetary policy meeting, scheduled for today, is likely to become center of market attention during the day as recent election shock may provide something new from the Canadian central bank and may help forecast the CAD move which has been on its upward trajectory off-late. Moreover, with nothing to release from US, chances of the USD to carry its yesterday’s down-turn can’t be denied while the EUR can continue extending its up-move ahead of the tomorrow’s ECB.
Thursday’s ECB meeting gained heavy repercussions from the global financial markets as Euro slid nearly 2% after the ECB President, Mario Draghi, refrained from being so hawkish and said that the central bank will review its current monetary policy in December, indicating probable QE extension. The USD gained heavily against majority of the counterparts due to the dovish ECB comments and upbeats housing and jobless claims details. The GBP remained fragile even as UK retail sales rallied by the highest levels since January while the JPY kept losing its recent gains as expectations concerning more stimulus by the Bank of Japan favored the currency decline. The commodity currencies, mainly the CAD, AUD and NZD remained mostly higher, except against USD, due to the carry trade effect after ECB statement. Moreover, the Crude prices also rallied with better economic numbers favoring higher energy demand while the gold price maintained its decline as stronger USD curbed its safe-haven demand.
Friday is likely being another good day for the USD as the rest of the global central bankers, mainly triggered by the ECB and BoJ, kept favoring monetary easing, opening room for further declines of EUR and JPY respectively. Some of the BoJ policy makers hinted the Japanese central bank is likely downgrading its growth and inflation forecasts during the next week’s monetary policy meeting while the Japanese Finance Minister indicated that even if the economic growth is okay, inflation keep raising problems for the Japanese economy, favoring more policy actions.
With the renewed pessimism amongst global central bankers, except Federal Reserve, coupled with improved US economic details, chances are higher that the greenback will end up gaining a bit more during the rest of the Friday; Though, flash manufacturing and services PMIs from Europe may help limiting the increase of USD and a bit firmer EUR. However, rise in the expectations favoring Fed rate hike by the end of 2015 is likely to remain intact and can help the USD in near-future.
Following the dovish comments from ECB President on Thursday, the Chinese central bank took yet another step to fuel their struggling economy and cut the interest rates for the fifth time this year during Friday, providing considerable strength to the USD that closed at the highest levels in more than 2 months. The PBOC, Chinese central bank, announced a 25 bps cut in the benchmark lending rate and 50 bps cut in reserve-requirement ratios for lenders on Friday. The JPY remained more on the negative side against majority of its counterparts as speculations that the BoJ, in its monetary policy meeting during this week, may announce further monetary easing while the GBP remained firm due to upbeat Retail Sales. Moreover, the commodity currencies, namely AUD, CAD and NZD, were mostly strong, except against USD, as additional easing by the China signaled more earning for them. The Crude prices sagged for the second consecutive week as global economic slowdown coupled with supply glut kept hurting the energy demand.
The crucial week, that encompasses the FOMC, BoJ, RBNZ and important GDP numbers, started with the Chinese leaders’ gathering to map out a five-year plan for the world’s second-largest economy while hawkish comments from the IEA official, favoring tight crude supplies from 2016 provided a bit of pullback to the crude prices.
During the rest of the day, the German Ifo Business Climate Index, US New Home Sales and the New-Zealand Trade Balance are likely to gather much of the attention from market players. However, this week’s BoJ is likely being the most important event that could decide JPY moves. If the BoJ adhere to China and ECB like dovish path, the JPY could liquidate its near-term gains while avoidance to additional monetary easing could fuel the Japanese currency further. The USD has started enjoying weakness of Euro and China; should this week’s GDP numbers meets expectations and the BoJ favors loose monetary policy, chances of extended rally by the greenback can’t be denied. Hence, it would be in the best interest of the market players to keep tracking the important updates and favor USD given these supports the USD up-move.
Following is rally on weekend, backed by Chinese rate cut, the US Dollar failed to hold the gains on Monday as weaker New Home Sales, which weakened to almost a year’s low, favored expectations that the Fed would refrain from signaling interest rate hike during 2015. Moreover, the overall rout of equity selling together with weaker Chinese Industrial profits triggered market players’ declining appetite for riskier assets, and hence, providing additional weakness into the greenback prices. The yen was a clear winner on Monday and it currently is on Tuesday as renewed risk pressure favored the safe haven demand of the Japanese currency; moreover, speculations have also mounted that the BoJ would refrain from announcing additional monetary easing. The Euro and the GBP were little quieter while the commodity currencies remained troubled with higher expected US inventories and pessimism at China.
On Tuesday, markets carried forward the Monday’s trading pattern, favoring the JPY and beating USD, ahead of UK GDP, US Durable Goods Orders and CB Consumer Confidence release.
Should today’s US details follow recent pattern of downbeat numbers, the USD is likely to witness continued decline backed by expectations that the Fed would delay interest rate hike and the same is likely helping the JPY to gain more safe haven demand. Moreover, stronger UK GDP may provide considerable GBP strength.
Even if the US Consumer Confidence plunged to the lowest in three months and the Core durable goods orders contracted by the highest pace since March 2015, the US Dollar registered a positive daily closing as market players await FOMC decision, scheduled to announce during the later part of the day. The Euro remained a bit weaker with one of the ECB policy makers marking dovish comments in public appearance while slower than expected UK GDP growth pulled the GBP down. Moreover, the Crude prices remained weaker with expected higher US crude stockpiles, to be released today, while Gold prices witnessed a profit booking and halted its week long decline. The AUD, NZD and CAD were all mostly negative due to Chinese pessimism.
During the early part of Wednesday, the Australian CPI rose less than economists forecast last quarter to 0.5% versus 0.7% expected and prior while trimmed mean CPI, Government’s one of the preferred measure of inflation, plunged to the lowest levels since April 2013 to 0.3% against 0.5% forecast and 0.6% previous reading, giving the central bank scope to resume interest-rate reductions, forcing the AUD to extend its downside.
During the rest of the day, GfK German Consumer Climate Index, FOMC and RBNZ are likely to gain the lime light while the FOMC will be at the center of market attention. Considering the recent rout of economic details, retail sales, manufacturing, inventories and exports all disappointed, while new jobless claims and housing data – for the most part – have showed continued strength. Hence, there is a bit more of uncertainty regarding what could the Fed confirm for December rate hike. Should the FOMC statement continue flashing mixed signals chances are higher that the USD can liquidate some of its nearby gains; however, an indication toward the December rate hike may provide considerable strength to the greenback. Moreover, the RBNZ, even if not likely to alter its current monetary policy, can convey the bearish message and may further damage the NZD.