With optimism surrounding US Dollar growth, the greenback completed its best year since 2005 by gaining across the board as Federal Reserve is on the verge of increasing their benchmark interest rates while rest of the central bankers, namely ECB & BoJ, kept on adhering to lose monetary policies. The Pending Home Sales, published on Wednesday, beat forecasts and supported the greenback even with higher Jobless Claims and weaker Chicago PMI numbers. The Euro region currency and the JPY remained weaker amidst weaker economic cues supporting extended lose monetary policy actions while the AUD, NZD & CAD also fell as Chinese numbers kept signaling threat of slowdown in the last industrial nation.
Today, the Chinese, Japanese, New Zealand and Swiss markets are closed while the Manufacturing PMIs from UK, US and the Europe can provide clues to the market players. However, being the Friday and the first working day of the year, extended holidays are expected that can curb the liquidity into the market.
Even with lesser than expected ISM Manufacturing PMI, the USD rallied heavily during Friday, helping the greenback index (I.USDX) to register third consecutive weekly gain, by testing eight year heights. The Euro region currency declined heavily on Friday as the ECB President, Mario Draghi, in an interview with German newspaper Handelsblatt, said that the policy makers are ready to fight-back the deflation risk; however, he failed to discuss actual process ahead of the ECB meet on Jan 22. Moreover, election campaign ahead of the snap election on January 25 has begun in Greece with anti-austerity party seems gaining majority in putting their foot ahead of the austerity supporters. This has led to the speculation that the Greece may have to leave the Euro region as the Germany is also favoring the same and that in turn can cause reignited Euro crisis. Commodity currencies, namely, AUD, NZD and the CAD registered considerable declines as weaker commodity prices and the pessimism over China and Europe spread pessimism. The Japanese Yen remained sideways to weak as BoJ continued supporting lose monetary policy while the re-ignited safe haven demand supported declines of the currency.
During the early hours of the day, the Australian Manufacturing Index and the Japanese Manufacturing PMI legged behind their prior readings and kept supporting the weakness of AUD and JPY respectively. Preliminary readings of German CPI and UK Construction PMI, scheduled for the rest of the day, are likely to support fueling volatility during the day while important data points, like EU Flash CPI, UK PMIs, FOMC meeting minutes and NFP, are likely to make traders busy during the day.
First day of the data filled week remained positive for the US Dollar as the greenback kept its up-move intact ahead of the important events scheduled for the week that can help determine the timing of interest rate by the Federal Reserve. The Euro region currency remained troubled as campaign for the snap election in Greece shows supporting the anti-bailout party that can cause the Greece exit from the Euro region. Moreover, concerns about the weaker Inflation number, scheduled for Wednesday, also keep suggesting that the ECB will announce full-fledged asset purchase program on January 22. The GBP also declined to its weakest level in 17 months against USD after the Construction PMI slowed with the least pace since September 2013. The Japanese Yen gained as the decline in Crude Oil Prices and the plunge in Asian stocks supported safe haven demand of the currency. The Australian Dollar and the New Zealand Dollar gained after the news shown that the China is planning for 300 projects as part of a broader 10 trillion Yuan plan to run from late 2014 through 2016. The decline in Crude Oil prices hurt the Canadian Dollar and it tested nearly 5.5 years low. Moreover, the SNB Chief, in an interview to the newspaper, said that they can go for the negative interest rate starting from 22 January and if the Europe is going for the heavy asset purchases it would be positive for their EURCHF cap of 1.2000.
Early today, the Australian Trade Balance showed lesser than forecast trade deficit and the Chinese HSBC Services PMI tested the highest level in three month. During the rest of the day, the Services PMIs from Europe and UK coupled with the US ISM Non-manufacturing PMI and the Factory Orders will be key readings to take note of.
As the greenback has gained significantly and indicators from the rest of the globe are forecasted to show strength, chances are higher that there can be a mild pullback and the USD will liquidate some of its recent gains; however, this doesn’t support for the reversal and the overall strength of the greenback remains intact until the crucial events of Wednesday and Friday spread pessimism.
Even with the weaker ISM Non-Manufacturing and Factory Orders, the US Dollar maintained its gains on Tuesday as market players remained optimistic for the greenback ahead of the ADP number and FOMC meeting minutes, scheduled for release later today. The Euro region currency kept declining as Flash version of CPI y/y, scheduled for release today, signal a pessimistic reading while the GBP also maintained its downtrend with Services PMI, the main sector of the economy plunged to the lowest since June 2013. The Japanese Yen gained for the second consecutive day with safe haven demand supporting the JPY buying while the NZD and AUD gained due to the Chinese news of upcoming projects.
Early today, the Australian AIG Service Index tested four month high; however, remained below 50 level while the ANZ Commodity Price Index for New Zealand plunged to the lowest since May 2012. Market players await big releases of the day, EU CPI, US ADP & FOMC Meeting minutes in order to determine near-term moves of EUR & USD respectively. Moreover, the German Retail Sales and Unemployment Rate, Canadian Trade Balance and Ivey PMI coupled with US trade balance are some other details that needs to be observed closely.
With the BIG releases on cards, it would be better to wait for the actual outcome before taking any positions; however, looking from the broader perspective, the USD is likely to maintain its status as a clear winner and can be buyers’ darling. The plunge in the ADP number and/or dovish release of the FOMC minutes can become a reason for the greenback to liquidate some of its gains ahead of the Friday’s crucial release.
Big releases on Wednesday couldn’t fuel more of the volatility as the outcomes were mixed as expected and market players couldn’t be convinced for clear outlook of either US or Europe. The FOMC meeting minutes, released on Wednesday, revealed that the addition of the word “Patient” is almost same as the previous “considerable time” and the Fed is in no mood to hike the interest rate soon than the April. However, the improvements in the labor market were perceived to be more supportive to increasing growth numbers. On the other hand, core version of EU Flash CPI surpassed expectations and the nullified the negative CPI numbers as market players think that the ECB President can say that the decline in CPI is mainly due to the energy prices. The US ADP numbers remained more of the US Dollar supportive as it surpassed the expectations and rose by 241K against the forecast and revised prior number of 227K. The US Dollar remained positive after all this details as Friday’s labor market numbers are likely to provide a reason for the greenback to rally considerably. Rest of currencies carried their own trend as the commodity currencies, AUD, NZD and CAD remained positive while the CHF, GBP and the JPY weakened against their US counterparts.
Early today, the Australian Building Approvals m/m unexpectedly rallied by 7.5% and provided additional support to the Aussie. German Factory Orders and the European Retail Sales coupled with the US Jobless Claims are likely to provide intermediate cues to the forex market traders ahead of the tomorrow’s crucial US NFP.
Considering the uneven movement, it would be better to wait for the Friday’s release concerning US labor market before extending buying bets on the USD. However, it doesn’t say that the greenback is likely to reverse its overall strong trend.
Have a green-pip-day……
Even with higher than forecast Jobless Claims number, the US Dollar registered a positive closing for the fourth weekday; however, comments by the Federal Reserve of Minneapolis President, Narayana Kocherlakota, that increasing the U.S. interest rates this year would hinder a recovery in inflation provided considerable damages to the greenback since the start of the Friday. The Euro region currency continued its decline ignoring the higher than expectation Retail Sales number as the German Factory Orders plunged; moreover, comments by the ECB President Draghi that the additional stimulus measures may include sovereign bond purchases hurt the Euro more. Currencies of New Zealand and Australia kept gaining while the GBP extended its decline.
During the early hours of Friday, the Australian Retail Sales registered least advance since October while the Chinese PPI slumped most in 2 years while the CPI number matched forecast of 1.5%. For the rest of the day, the UK Manufacturing production and the Canadian Building Permits and employment numbers are likely to providing intermediate moves to the GBP and CAD respectively; however, the US labor market details are likely to become market mover of the day. Should the NFP continue rising above 200K for the eleventh month, the USD can extend its advance. Alternatively, only a number below 200K can hurt the greenback.
As the USD witnessed a mild pullback during the early hours, it could be taken as an opportunity to buy the greenback; though, it would be better to for the trader to wait for the actual reading.
With the much awaited US FOMC meeting minute and the labor market numbers released last week, US Dollar Index (I.USDX) registered fourth weekly advance to multi-year highs. However, the greenback liquidated some of the gains during weekend as unexpected drop in U.S. wages supported comments from FOMC meeting minutes that the bank will wait for couple of more meetings before raising their benchmark interest rates. The Euro region currency kept its decline intact and tested nine-year low versus the greenback as concerns that the ECB is going for bond purchases supported expectations of additional money supply into the troubled region. The Japanese weakened heavily as pessimism over the Europe, coupled with weaker US releases, supported safe haven demand of the JPY while the Pound (GBP) declined to its weakest level in 17 months against the dollar as weaker manufacturing and services growth slowed last month while construction output rose lesser than the consensus. Moreover, the Canadian Dollar stretched its decline with unexpected plunge in Building Permits and employment change, together with weaker crude oil prices, hurt the outlook for Loonie.
As opposed to the previous week, current week has very few economic numbers, except CPI from UK & US together with US releases relating to consumer outlook and retail sales. Today, the Japanese markets are closed due to Coming-of-Age Day while the Australian ANZ Job Advertisements m/m rallied with Home Loans remain on negative side. For the rest of the day, Business outlook survey by the BOC and the speech by Federal Reserve Bank of Atlanta President Dennis Lockhart are the only releases left for publishing.
As the US Dollar started witness a bit of weakness on the back of sluggish numbers, it would be better to expect mild pullback in USD strength; however, this doesn’t negate the longer-term outlook of the greenback.
Having weakened on the Friday, with unexpected decline in wage numbers, the US Dollar regained its strength on the first day of the week and rose against majority of its counterparts. However, the JPY and the GBP remained against its US counterpart as the safe haven demand of the JPY supported the Japanese currency while market players remained cautious ahead of the UK CPI, scheduled for today, and the supported the GBP. Moreover, the Gold prices rallied to the four week high as the speculations about late interest rate hike by the Fed and the additional QE by ECB, coupled with the decline in Crude Oil price, kept supporting the safe haven demand of the yellow metal. Top forecasters, namely Goldman Sachs Group Inc. and Societe Generale SA, reduced their price forecasts for the crude oil and provided additional support to the safe haven demand. Nomura, the best forecaster for JPY, said that the decline in Crude prices will help reduce Japanese trade Deficit.
Today, the Chinese Trade balance rose above its forecast; however, the number was lesser than the forecast and provided additional weakness to the commodity currencies. Market players are likely to concentrate more on the UK CPI for the rest of the day. Should the actual number meet expectations of printing the lower than previous 1.0% number, at 0.7%, the GBP can witness additional decline.
As the greenback started gaining after the Friday’s decline, it would be better to support the USD buying; however, it could not register profits against JPY & GBP and an additional plunge in Crude prices and the higher UK CPI can continue maintaining USDJPY & GBPUSD current moves.
It was undoubtedly the CHF day yesterday wherein the SNB, in a surprise action removed its three-year cap of 1.2000 for EURCHF and said that it will push the interest rate on sight deposits to -0.75% from -0.25%. This move provided considerable strength to the CHF which gained 38% against the USD and 41% versus the Euro yesterday. Magnified volatility fueled safe haven demands of JPY and the Gold which also rallied due to the same news of SNB’s action. The Euro continued its decline with much pace after the news and the Aussie and the NZD gained.
Having witnessed such a HUGE movement yesterday, markets are likely to digest the weaker fundamentals of the rest of the globe and can restore its original trading pattern in favor of the USD. However, recent flush of negative economic readings from US can result a mild decline into the greenback.
For the rest of the day, CPI numbers from the US and the Euro together with the UoM Consumer Sentiment Index are the ones that are likely to roll the market moves. Also, the Swiss Retail Sales and the German CPI will also become an important point of information to determine market moves.
Thursday’s Swiss National Bank’s move was a show-stealer of the last week as the CHF gained heavily after the move and forex market as a whole became incapable of digesting the news with plenty of trading accounts being wiped-out and some of the companies shut down. The news also fuelled safe haven demands of JPY and Gold. The yellow metal tested more than four month high while the Japanese currency gained for one more week against its US counterpart. Moreover, news that the Chinese regulators took measures for controlling margin trading at three of the nation’s biggest securities firms also supported the safe haven buying. The EUR kept its decline continue with market players expecting a decision start of government-bond purchases by the ECB at its monetary policy meeting on Jan 22.
Current week has many important readings that are likely to continue fueling volatility into the forex market. Notable amongst them are monetary policy meetings of BoC, ECB and BoJ together with the UK labor market numbers, Retail Sales and Chinese HSBC Flash Manufacturing PMI. Should the ECB announces its Bond Buying Program, which is most expected, the Euro is likely to plunge across the board while change into the price outlook by BoJ can also affect the recent JPY strength.
During the day, the Swiss PPI is the only important data point which can help determine CHF moves while the USD is more likely to continue is upward trajectory as Friday’s UoM Consumer Sentiment, which tested an 11-year high of 98.2, provided considerable strength to the greenback.
Considering the recent turmoil into the market, safe haven assets are likely to continue strengthening while the greenback can also remove some of its gains with lesser economics to track during the week. Hence, market players are advised not to take strong trading measures unless the important events release something clear.
With the US markets enjoying their extended weekend, due to holiday on Monday, the forex market remained sideline; however, the US Dollar behaved in a strange way after it gained against majority of the counterparts (including JPY, NZD & AUD) while losing the ground against the Euro. The European currency dropped due to the profit booking ahead of the ECB meeting that is expected to deliver $550 million worth of asset purchase announcement; however, majority of the analysts favor lesser than the forecast asset purchase declaration and the mild pullback to the troubled region currency. The CHF weakened for the second consecutive day even after the higher than forecast PPI numbers. Moreover, the BlackRock Inc. said it sees the AUD slumping 15 percent this year and provided additional weakness to the Aussie.
Early today, the Chinese GDP number for the Q4 2014 beat the forecasts but remained to the lowest level since April 2009. Moreover, the improved number of NZIER Business Confidence couldn’t help the NZD and the commodity currencies remained weaker. During the rest of the day, the German ZEW Economic Sentiment Index, the Canadian Manufacturing Sales, NZ GDT Price Index and the US NAHB Housing Market index are likely to fuel volatility into the forex market.
As the greenback has regained its strength on the first day of the week and there are important economics to fuel the forex market, it would be better to support the USD buying; however, one should be cautious enough to consider all the important releases before taking a judgment as a pullback into the EURO can become detrimental for the USD strength.
Being the only developed economy to gain IMF’s upward revision to the 2015 growth numbers, the US market rallied on the first trading day (for them) of the week. The greenback ignored lower than forecast NAHB number as rest of the global economies are on the path of monetary easing while the IMF considers US to drive faster. The Japanese currency remained weaker on Tuesday ahead of the BoJ meeting, which supported the JPY early today, with no change in its monetary policy and upward revision to growth numbers in 2015 fiscal year; however, the central bank cut the inflation forecast. The Canadian Dollar extended its decline and tested the lowest in more than five years on the back of speculations that the Bank of Canada, in its meeting later today, can signal interest rate cut in near future as the decline in global growth forecast by the IMF provided additional weakness to the Crude Oil, Canada’s main export item. Moreover, the New Zealand Dollar also plunged heavily after the Inflation number plunged negative for the first time since January 2013, supporting the expectation that the RBNZ won’t hike interest rates soon. The Euro region currency extended its decline even after improved ZEW numbers while GBP strengthened a bit ahead of the labor market numbers scheduled to release today.
Having witnessed New Zealand CPI and BoJ releases during the early day, UK labor market numbers, minutes of latest BoE Meeting, Canadian Wholesale Sales and US housing market are the important details that can fuel volatility into the forex market for the rest of the day.
US Dollar gained additional support from the recent IMF news and is likely to continue its advance should the scheduled economic numbers perform as per forecast. Moreover, rest of the globe details are signaling weakness and can support the safe haven demand of the greenback. Hence, it would be better to support USD buying but it should always backed by proper analysis.
Yesterday, there was another unexpected move by one more central bank, this time it was Bank of Canada (BOC), that lowered its bench mark interest rate to 0.75% from 1.0% and also lowered its inflation and growth forecast. The BoC cut its growth forecast for the first half of 2015 to 1.5% from 2.4% previously communicated in October while lowering the inflation forecast to 0.3% in Q2 2015, below the central bank’s target range of 1.0% to 3.0%. The move provided another push to the already volatile forex market that weakened the commodity currencies, AUD, NZD and CAD. The Canadian Dollar plunged by the heaviest in almost three years to the lowest level in six years while the Australian and New Zealand Dollar became the biggest losers amongst 31 currencies. Moreover, two of the ECB officials said that the central bank is likely to announce a $5 billion monthly bond purchase plan that would run for nearly a year. UK currency remained sidelines due to the mixed labor market details and dovish MPC voting for the interest rate change wherein the two members that were supporting the rate change rolled back their vote in favor of the stagnant monetary policy. Even after all these details revealing weakness of the respective economies against the US, the US Dollar weakened and registered a daily decline.
Early today, the Business NZ Manufacturing Index printed a better number than the previous reading while the Australian MI Inflation Expectations plunged to the lowest level in five months. These details continued weakening the respective currencies of New Zealand and the Australia. Market players are now eagerly waiting for the ECB announcement which is likely to deliver a fresh round of QE that buys government bonds. Should this happen, the longer-term Euro weakness can’t be denied. However, a lower than the forecast of 550 billion Euro asset purchase announcement can provide considerable immediate strength to the troubled currency. Moreover, the speech by the ECB President is also likely to provide additional clues relating to the future actions of the central bank. Hence, it would be better to wait for the actual release in order to take the trades.
As the current market focus is more centered on the ex-US markets, releases are likely to provide considerable moves to the Forex market; however, strong outcomes can affect the greenback in an adverse way.
And the ECB finally used its last weapon from arsenal! The European Central Bank (ECB) yesterday acted aggressively in countering deflation worries as it introduced QE worth 1.1 trillion Euro ($1.3 trillion) with the target to purchase nearly 60 billion Euros on a monthly basis that will start in March and last until at least September next year. Market players expected the amount as 50 billion Euros but the BOLD Draghi again proved his courage and surpassed the estimation and hurt the Euro to decline for sixth weekly decline against the dollar. The US Dollar Index (I.USDX) tested the highest level since 2004 as it’s the currency of a nation that is likely to hike the interest rate during this year. The GBP also plunged heavily as UK Budgetary Deficit surpassed expectations and the PMC member said weaker inflation numbers can become a cause for the BoE to hold its interest rate hike in near future. Moreover, the Australian Dollar plunged to its weakest level since 2009 as speculations surged that the RBA can also cut their benchmark interest rate on its Feb. 02 meeting after the SNB & BoC announced surprise cuts. The Dollars of New Zealand and Canada also registered declines as the overall sentiment was in favor of the USD and commodity basket remained sluggish.
Early today, the Chinese HSBC Flash Manufacturing PMI surpassed expectations and previous releases by being at 49.8; however, the figure was still below expansion level of 50.0 and caused considerable worries for the commodity currencies and the industrial world.
During the rest of the day, Retail Sales from UK & Canada coupled with Flash readings of Manufacturing and Services PMIs from various European nations and Canadian CPI are likely important readings that will close the important week. Should the UK releases continue signaling weaker economic aspects of Britain, expectations concerning the rollback of the interest rate hike expectations will gain momentum and the GBP can decline heavily.
As the market have continue favoring the USD, due to the loose monetary policies and trouble of deflation at rest of the globe, it would be better to support USD buying; however, snap election in Greece, during the Sunday, will become important to determine the future of the Greece. Should the anti-bailout party wins, chances of Greece departure from Euro becomes stronger and the Euro is likely facing another strong negative.
With majority of central bankers adopting extra loose monetary policy measures to stem inflation, the US Dollar gained heavily during last week being the currency of the nation which seems the only contestant for hiking their interest rate in 2015. However, the greenback lose some of its gains on Monday as the German Ifo Business Climate Index tested the highest level since July 2014. Greek elections matched its forecast of victory by the Syriza party but they lack considerable majority and lead to the coalition party to stem the troubled economy. However, the talks of anti-bailout continue to take place while it was more of the clear that the Greece won’t exit the Euro and that stem the Euro region currency from its multi-year lows. The Yen gained as the Trade numbers favored the optimism by funneling down the deficit while the pound gained considerably after the Bank of England policy maker Kristin Forbes said prospects for the global economy because of robust growth in the U.S. and the potential for cheap oil to boost consumption and investment. The Australian Dollar and the New Zealand Dollar also gained on Monday with the commodity basket supporting these currencies while improvement in Australian NAB Business Confidence provided additional strength to the AUD.
After witnessing a pullback on the first day of the week, market players are now awaiting the Preliminary reading of the UK GDP, US Durable Goods Orders, CB Consumer Sentiment and New Home Sales. Should the UK growth number surpasses the previous reading, the GBP is more likely to register extended advance while the US numbers are also likely to supports the USD in gaining further heights.
On Tuesday, the broadly stronger US Dollar weakened against majority of its counterparts as weaker Durable Goods Orders signaled that the US policy makers will take time for announcing interest rate hike. The greenback ignored considerable gains in Consumer Confidence Index, which tested highest level since August 2007, and the four month high New Home Sales figure. Moreover, another central bank, Monetary Authority of Singapore, took monetary policy actions by cutting down the slope of its currency band. The UK GDP numbers lagged behind expectations and the Australian measure of Trimmed mean CPI surpassed expectations and previous reading. Malaysian Central bank is also scheduled to deliver its monetary policy decision today and it would be no surprise if it joins the rest of world in taking actions against deflation. With the continuous raft of unexpected measures from global central bankers, market players now become worried about the future course of Forex trading that rose to records in UK, US and gained considerably in various global leaders, like Japan.
Having witnessed the Australian CPI numbers during the early days, GfK German Consumer Climate is likely to provide intermediate moves to the forex market before the FOMC takes place during the later part of the day. Even though there aren’t expectation for altering monetary policy by the FOMC, should there be a surprise factor, as it is prevailing in many central bankers, the USD can fuel considerable volatility into the market and it would be better for the traders’ fraternity to stay out of the market before the actual release takes place. However, absence of the press conference by the Fed Chair is likely to tame the volatility due to event.
