GDP Beat Re-Prices Chance of Fed Hike:
“USD Prelim GDP q/q “1.0% v 0.4% expected)”
The US economy expanded in Q4 2015, giving USD bulls reason to be optimistic on the overall health of the economy.
Gross Domestic product printed a 1% annualised growth rate compared with the 0.4% expected, sending the Dollar rallying as the Fed comes back into play for 2016.
With further rate increases being all but written off after the horrible start to the calendar year, the GDP print removes the talk of recession and points to a continued rebound.
For more about GDP and USD information,check out our website.
Asian Data Dump Tuesday:
After yesterday’s relatively slow news day we get a huge data dump today during Asia. With both Chinese and Australian news on the cards, we’re capped off by the RBA cash rate decision later this afternoon!
Overnight we got a shock early move from the PBOC who again cut the emerging economy’s Reserve Requirement Ratio (RRR) by 50bps to 17%. The move will have an effect on the banks’ lending numbers and will attempt to stimulate the economy through increased lending capabilities and capital outflows.
Markets like the Aussie Dollar aren’t reacting to these cuts like it used to (see today’s chart of the day) and a slow grind is expected from here. I’m most interested in seeing how this effects the PBOC’s ability to continue to keep their controlled currency steady as money flows out of the country and the Yuan weakens on the back of the move.
For more about Asian Data, check out our website to receive more information.
A ‘risk-on’ tone swept through markets yesterday, with both equities and commodities both higher. This followed better than expected US manufacturing data and continued to alleviate fears that the Fed will not be thrown off course.
The biggest shock though, and something worth looking at from a trading point of view, was the Aussie Dollar’s strength in the face of quite simply HORRIBLE manufacturing numbers out of China!
For more information about the correlation of US and China,check out our website.
Aussie Aloof:
“AUD GDP q/q: +0.6% v +0.5% expected and +1.1% previously (revised).”
And with that, the Australian economy has officially come aloof from the rest of the world.
Defying economic struggles and uncertainty worldwide, Wednesday’s Australian GDP again printed a stronger than expected +0.6%.
This print will no doubt be a huge relief for the Reserve Bank of Australia who are notorious for their ‘wait and see, ride it out’ approach to monetary policy.
For more information about Aussie Data,check out our website.
Cable Gains Technical Relief and a Look at Natural Gas:
“GBP Services PMI (52.7 v 55.1 expected)”
Despite a weaker than expected UK Services PMI reading, GBP/USD printed a fourth consecutive bullish daily candle. We haven’t seen Cable go on a bullish run like this for a long time and while it is being attributed to over exaggerated Brexit fears, the move is still in fact just a corrective bounce off support in a long term bear market.
For more information about GBP data,check out our website.
NFP Clouds Fed Direction:
“USD Non-Farm Employment Change (242K v 195K expected)”
“USD Unemployment Rate (4.9% v 4.9% expected)”
“USD Average Hourly Earnings m/m (-0.1% v 0.2% expected)”
Even amidst a huge jobs number beat of expectations (plus upward revisions!), the USD was still seen on struggle street.
Non-farm payrolls smashed expectations of 195K with an excellent headline print of 242K jobs created, continuing the recent trend of beating expectations month after month. Meanwhile, the unemployment rate also printed green, holding steady at 4.9%.
For more information about American Data,check out our website.
Extraordinary European Expectations:
With Draghi and the ECB in play tomorrow night, attention stays on the Euro during today’s trading session amidst mixed expectations.
While expected to provide yet more stimulus for the economy, it isn’t clear what avenues the ECB will take to achieve their goal. Mario Draghi knows all about under delivering on promises and we’ve called Draghi ‘the boy who cried wolf’ on this blog before. I just feel the market is nervous about what could come and the price action leading into the decision reflects this view.
For more information about European Data,check out our website.
[B]Temporary Halt at Resistance:
[/B]Major markets temporarily halted their runaway tear overnight. I say temporarily because for all the headlines that have been written today, all I see is price hitting a major resistance level and experiencing a rejection at first touch.
CNY Trade Balance (210B v 339B expected)
The major fundamental theme from yesterday was the miss in the Chinese trade balance number. It not so much renewed global growth concerns as theyve always been lingering, but at least brought them back to the fore. Seasonality can be blamed here to some extent, so markets at least have an excuse if they want to take it.
For more information aboutChinese Data, check out our website.
Kiwi’s Kut and a Look at Trading Expectations:
Bucking economists’ expectations, the Reserve Bank of New Zealand stunned Forex markets this morning by cutting their overnight cash rate by 0.25% from 2.50% to 2.25%.
Of course when things don’t go to expectation, you get huge moves in Forex markets, and that’s exactly what we saw in the Kiwi today!
For more information about New Zealand data,check out our website.
Mario Draghi: Eaten by the Wolf:
SPOILER ALERT. That is how the boy who cried wolf fairytale ends. In the ECB’s case, with a 400 pip, rip your face off rally!
For more information about European Data,check out our website.
Central Banks’ Right of Reply:
Just like that we say goodbye to the ECB market driver and hello to the Fed. Central banks will get their right of reply to Mario Draghi and last week’s ECB stimulus, with all of the big players in action this coming week.
Tomorrow morning’s economic calendar is packed, with RBNZ Governor Wheeler speaking in Auckland first up, followed immediately by monetary policy meeting minutes out of Australia, and finally the big one of the day: The Bank of Japan policy meeting.
Australian and Kiwi sentiment will already be bearish, already gapping down to begin the week on the back of a weekend deluge of Chinese data misses. The weakening economy printed disappointing numbers in credit growth, industrial production, and the surprisingly weak retail sales which were actually being viewed as one of the final shining lights for the economy.
Following New Zealand’s shock cut last week, it will be interesting to read what the RBA was thinking during their previous meeting and whether external factors have changed expectations since then. Domestically the Australian economy is still performing remarkably well which makes me continue to lean toward the no change camp.
The AUD/USD weekly chart we have published in the technical analysis section of the Vantage FX News Centre is a chart of beauty for traders who rely on major levels to manage their risk. Click the ‘play button’ on the chart for a before and after snapshot of the level.
For more information about AUD data,check out our website.
AUD Jumper: Stevens Up for the Block:
The start of the week stuttered yesterday with an uneventful economic calendar leading to sideways chop as the majors consolidated at their highs. Nobody likes Mondays so how about we join Forex markets and just skip through that one? The preview of central bank action throughout Asia in yesterday’s Daily Market Update stays relevant so definitely give that blog a read if you missed it.
With Monetary Policy Meeting Minutes out of Australia first up, this Bloomberg article and subsequent charts caught my eye. The Aussie dollar really has been the best performer over the past month or so, bucking the trend with moderately good economic data reflecting positively on the domestic economy, but most of all benefiting from commodity prices bouncing off lows and easing in Europe and NZ meaning money is flowing into Australian assets in search of yield.
For more information about Aussie Data,check out our website.
FOMC Expectations:
An inconsistent, mixed trading day for the US Dollar yesterday and with more of the same expected heading into FOMC, keeping an eye on your major technical levels will be vital.
Today’s economic calendar looks quiet during Asia so we could see an erratic one as traders anticipate the moves to come tomorrow morning during FOMC.
We do see CPI released beforehand, but it’s a release that’s not going to have an effect on decision making this far out, so take the short term volatility that may accompany the release for what it is.
As for the FOMC meeting itself, nobody is expecting a move at this meeting but as we’ve spoken about before, the improvement in the jobs market, the commodity price rebound, as well as a relaxation around market conditions worldwide has surely given reason for the Fed to relax and head forward on the path toward monetary policy normalisation. Something markets aren’t quite pricing in and where some short term trading opportunity lies.
For more information about CPI data,check out our website.
This morning’s FOMC decision and accompanying statement came and went as expected after announcing that the funds rate will be left in the same 0.25%-0.5% range since hike number one.
We talk a lot about the ‘dot plot’ both here and on social media so I wanted to go into a little more detail around what the graph actually means.
The dot plot is a graph that while not officially part of setting policy, provides markets with excellent insight into how the Fed as whole is feeling about interest rates heading into future meetings. As market expectations are key when it comes to fundamental analysis for Forex traders, the insight this graph shows is invaluable.
Each dot represents one FOMC participant and where they think that the Fed funds rate will be at certain time periods in the future. Each dot on the plot stays anonymous and obviously the further out the prediction, the more open to change it will be.
For more information about European Data,check out our website.
BoJ Intervention: When Will Central Banks Learn?
When are Central Banks (and traders for that matter) going to learn that central bank intervention is a waste of time? The free market always wins. Not sometimes wins, ALWAYS WINS.
For more information about USD data,check out our website.
Negative Rates and Inflation: Economists v Traders
With only a handful of data releases in this Easter shortened trading week, I wanted to take a step back to consider the effect that negative interest rates have on inflation, and then how that could affect Forex markets heading forward.
This was a topic that the Fed’s James Bullard spoke about last Friday and that I wanted to go into more detail on.
For more information about
Negative Rates and Inflation,check out our website.
AUD/USD Longs: The Risk
A slightly unusual Asian session ahead, with RBA Governor Glenn Stevens due to speak about ‘the global financial sector resilience, volatility, and connectedness’ at the Australian Securities & Investment Commission Annual Forum in Sydney this afternoon.
To satisfy your OCD (and come on, we’re all traders here which means we all have at least a mild case), we still have the usual 11.30am Sydney releases in the form of second tier Australian HPI as well as the RBA’s Assistant Governor Malcolm Edey, due to participate in a panel discussion about ‘risks related to central counterparties’ at the Australian Securities & Investment Commission Annual Forum in Sydney.
For more information about AUD data,check out our website.
Brussels Wild Whipsaw
A wild whipsawing session for both Forex and stock Indices overnight as news of yet more terrorism in Europe hit the newswires.
At least 31 people were killed in Brussels, Belgium as terrorists detonated bombs in the public passenger hall of Brussels airport and in a local subway station.
These horrible incidents follow the Paris terrorist attacks back in November… While no doubt adding to to European security concerns around the issue of migration, the affect on markets could be muted. This just happens too much now for it to be a sustained market moving event. Sad but true, but the focus stays elsewhere.
For more information about AUD data,check out our website.
Welcome Back! Indices and the Kiwi in Play
Markets return to normal service today following the Easter long weekend. I trust that you used your time away from the charts wisely and used the downtime to refresh your body and mind.
Knowing when to take a break is an essential psych aspect of Forex trading and can do wonders for maintaining your positive P&L. If you ever find yourself taking dumb trades because your head just isn’t in the game, step away and return when your head is clear. Simple solution.
During thin trading conditions such as holiday Friday and Monday, markets can either go mental and whipsaw like crazy, or markets can peter out and do nothing. This weekend was most definitely the second option, with Forex markets all basically back where they started and nothing too exciting to report in the short term.
For more information about Forex Trading Data,check out our website.
Janet’s Cryptic Code Continues
Deciphering the central bank rhetoric is a little like doing the cryptic crossword in your local Sunday newspaper. The paper says one thing, but it’s not actually the point they are trying to make! Janet Yellen’s speech on ‘outlook, uncertainty and monetary policy’ in New York overnight did exactly that.
For more information about US data,check out our website.
